UBC Graduate Research

The Rental Housing Supply Roundtable Rogers, Matthew Mar 31, 2013

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             The Rental Housing Supply Roundtable Professional project, School of Community and Regional Planning Matthew Rogers                          THE RENTAL HOUSING SUPPLY ROUNDTABLE  by  MATTHEW ROGERS  B.A. (Hons), The University of Winnipeg, 2006  A PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF  MASTER OF SCIENCE (PLANNING)  in  THE FACULTY OF GRADUATE STUDIES  School of Community and Regional Planning  We accept this project as conforming to the required standard  ......................................................  .....................................................  .....................................................   THE UNIVERSITY OF BRITISH COLUMBIA March 2013 © Matthew Rogers student, 2013   i  Executive summary Similar to numerous other jurisdictions, in recent years Manitoba has experienced a serious shortage of rental units. This shortage is coupled with, and complicated by, rising rents. This report explores Manitoba's changing housing market through a market overview that considers trends in the province's economic, population, and housing environment. Further, a review of policy options found in the research literature is provided. These contextual factors define the situation in which the Rental Housing Supply Roundtable (Roundtable) was struck. In 2011, the Minister of Housing and Community Development invited various housing stakeholders to assemble for the creation of a consultative and collaborative roundtable to provide professional expertise and specialized knowledge relevant to the issue of developing rental housing in Manitoba. Through the representation of a wide spectrum of communities, population groups, and sectors, the roundtable operated under a principle of collective responsibility as it provided balanced advice and expertise. The purpose of the Rental Housing Supply Roundtable was to:  create a forum for the engagement of stakeholders to work towards the development of broad-based solutions to rental housing issues in Manitoba in a collaborative and consultative fashion;  provide the Minister of Housing and Community Development with expert advice on matters related to the production of new rental housing in Manitoba;  provide the Minister or Housing and Community Development with advice on the efficacy of strategic directions, plans, policies, programs, and services related to the production of rental housing in Manitoba;  strengthen and develop partnerships across sectors that will enable the development of new rental housing at a variety of affordability levels. After a period of discussion and analysis, the Roundtable agreed to the following shortlist of policy proposals:  a property or income tax relief program for the first 5 to 10 years of the project’s life.  a provincial capital grant, on a per unit basis, to stimulate the development of rental property at reasonable market rents.  that the Province pursue equal access supply measures for all housing sectors across the housing continuum. This would include non-profit, co-op, affordable private, and private market rental units.  ii   that the Province review existing Employment and Income Assistance (EIA) shelter rates and increase the benefits to better reflect the cost of housing. This review should be made a regularly scheduled feature of the EIA system.  provide a portable rent geared to income (RGI) shelter allowance for low-income working households.  that the Province partner with the Manitoba Construction Sector Council to help support labour market training programs; and further, that labour market training programs with a specific aim towards training Aboriginal Peoples, new Canadians, women, and youth be developed.                    iii  Contents EXECUTIVE SUMMARY........................................................................................................................................................................I LIST OF FIGURES ............................................................................................................................................................................... V LIST OF TABLES ................................................................................................................................................................................ VI PROJECT INTRODUCTION .................................................................................................................................................................. 1 1 MANITOBA MARKET OVERVIEW ............................................................................................................................................... 2 1.1 ECONOMIC GROWTH: ..................................................................................................................................................................... 2 1.2 POPULATION GROWTH: .................................................................................................................................................................. 7 1.2.1 Financial environment: ......................................................................................................................................................... 9 1.3 MANITOBA – HOUSING MARKET CONTEXT: ....................................................................................................................................... 11 1.3.1 Rental Market .................................................................................................................................................................... 12 1.3.2 Homeownership Market .................................................................................................................................................... 20 2 LITERATURE REVIEW - RENTAL STIMULATION MEASURES ...................................................................................................... 24 2.1 MEASURES BY LEVEL OF GOVERNMENT - FEDERAL .............................................................................................................................. 25 2.1.1 CMHC’s restrictive mortgage insurance requirements ...................................................................................................... 25 2.1.2 Income tax legislation ........................................................................................................................................................ 25 2.1.3 GST legislation .................................................................................................................................................................... 26 2.1.4 Rental housing tax credit ................................................................................................................................................... 26 2.1.5 Federal land for affordable housing development ............................................................................................................. 27 2.2 MEASURES BY LEVEL OF GOVERNMENT - PROVINCIAL .......................................................................................................................... 28 2.2.1 PST policy ........................................................................................................................................................................... 28 2.2.2 Encourage municipalities to develop rental housing ......................................................................................................... 28 2.2.3 Address NIMBYism ............................................................................................................................................................. 28 2.2.4 Maintain existing stock ...................................................................................................................................................... 29 2.2.5 Provincial land for affordable housing development ......................................................................................................... 29 2.3 MEASURES BY LEVEL OF GOVERNMENT - MUNICIPAL .......................................................................................................................... 29 2.3.1 Development cost reductions and/or streamlined development process .......................................................................... 29 2.3.2 Review parking requirements ............................................................................................................................................ 30 2.3.3 Inclusionary zoning............................................................................................................................................................. 31 2.3.4 Density bonusing ................................................................................................................................................................ 31 2.3.5 Secondary suites ................................................................................................................................................................. 31 2.4 MEASURES BY POLICY OPTION AREA ................................................................................................................................................ 32 3 REPORT OF THE RENTAL HOUSING SUPPLY ROUNDTABLE ...................................................................................................... 36 3.1 PREFACE .................................................................................................................................................................................... 36 3.2 INTRODUCTION ........................................................................................................................................................................... 37 3.2.1 Rental Housing Supply Roundtable .................................................................................................................................... 37 3.2.2 Major themes ..................................................................................................................................................................... 38 3.3 MADE IN MANITOBA - ISSUES AND PROPOSED SOLUTIONS ................................................................................................................... 39 3.3.1 Issue – Tax treatment of rental housing............................................................................................................................. 39 3.3.2 Issue - Costs of construction that influence rental rate and rate of return on investment ................................................ 40 3.3.3 Issue – Affordability ............................................................................................................................................................ 43 3.3.4 Issue – Capacity .................................................................................................................................................................. 48 3.3.5 Issue - Regulatory obstacles ............................................................................................................................................... 49 3.3.6 Issue – Awareness .............................................................................................................................................................. 50  iv  3.4 MADE IN MANITOBA SUMMARY TABLE ............................................................................................................................................ 52 3.5 MADE IN MANITOBA PROPOSAL SHORTLIST ...................................................................................................................................... 54 3.6 FEDERAL MATTERS - ISSUES AND PROPOSED SOLUTIONS ...................................................................................................................... 55 3.6.1 Capital cost allowance ....................................................................................................................................................... 55 3.6.2 GST ..................................................................................................................................................................................... 55 3.6.3 Mortgage insurance requirements..................................................................................................................................... 56 3.6.4 Federal land for affordable housing development ............................................................................................................. 56 3.6.5 Affordability ....................................................................................................................................................................... 56 3.6.6 Industry capacity ................................................................................................................................................................ 57 3.6.7 Low-income housing tax credit program ........................................................................................................................... 57 3.6.8 Engagement ....................................................................................................................................................................... 58 3.7 FEDERAL MATTERS SUMMARY TABLE ............................................................................................................................................... 59 WORKS CITED .................................................................................................................................................................................. 60 APPENDIX A: RENTAL HOUSING SUPPLY ROUNDTABLE - TERMS OF REFERENCE ............................................................................. 64 APPENDIX B: RENTAL HOUSING SUPPLY ROUNDTABLE MEMBERSHIP ............................................................................................. 66 APPENDIX C: PROPOSAL SHORTLIST VOTING ................................................................................................................................... 67 APPENDIX D: JURISDICTIONAL SCAN ............................................................................................................................................... 68                 v  LIST OF FIGURES  Figure 1-1: Real GDP growth, 2006 - 2011 3 Figure 1-2: Average annual growth in real GDP, 2006 - 2011 3 Figure 1-3: Real GDP average growth by industry, 2006 to 2011 4 Figure 1-4: Interprovincial to international export ratio, 10 year average (%) 5 Figure 1-5: Unemployment rate (%), 2011 6 Figure 1-6: Unemployment rate, Manitoba and Canada, 2000 - 2012 6 Figure 1-7: Labour force participation rate (%), 2011. 7 Figure 1-8: Manitoba annual population growth, 1998 - 2012 8 Figure 1-9: Manitoba population increase, by 5 year period (%) 9 Figure 1-10: Canadian interest rates, 1980 - 2012 10 Figure 1-11: Consumer debt per capita, 2004 - 2010 11 Figure 1-12: Consumer debt per capita, % change, 2004 - 2010 11 Figure 1-13: Vacancy rates (%), selected jurisdictions, 1992 - 1999 12 Figure 1-14: Vacancy rates (%), selected jurisdictions, 2000 - 2011 13 Figure 1-15: Manitoba population and vacancy rate, 1992 - 2012 13 Figure 1-16: Winnipeg population and vacancy rate, 1992 - 2012 14 Figure 1-17: Rental starts Manitoba and Winnipeg, 1990 - 2011 14 Figure 1-18: Winnipeg CMA - total rental universe and population growth, 2002 - 2012 16 Figure 1-19: Percentage increase in average rent for two bedroom apartments by province, 2001-2011 17 Figure 1-20: Percentage increase in average rent for two-bedroom apartments, 10 largest CMAs, 2001 - 2011 18 Figure 1-21: Average rent 2 bedroom apartments, Manitoba and Winnipeg, 1992 - 2011 19 Figure 1-22: Average rent 2 bedroom apartment, Manitoba, Winnipeg and Canada, 2004 - 2011 19 Figure 1-23: MLS® Average Residential Price increase by Canadian provinces, 2004 - 2011 20 Figure 1-24: MLS® Average Residential Price increase, ten largest Canadian CMAs, 2004 - 2011 21 Figure 1-25: New homeownership starts Manitoba, freehold and condominium combined, 1991 - 2011 22 Figure 1-26: New home and re-sale markets, Winnipeg CMA, 2003 - 2013f ($) 23             vi  LIST OF TABLES  Table 1-1: Rental universe, Manitoba and Winnipeg 15 Table 1-2: Rental universe and vacancy rate by province 16 Table 1-3: Rents, major Manitoba urban centers, two bedroom apartments and all apartments, 2011 and 2012 18 Table 1-4: Average housing price, 2012 and 2013 22 Table 2-1: Supply side measures 33 Table 2-2: Demand side measures 35 Table 3-1: Estimated Required Subsidy for Construction of New Affordable Rental Units, Winnipeg 41 Table 3-2: Winnipeg income ranges and affordable rents based on 30% threshold. 44 Table 3-3: Average rent by type, Winnipeg. 44 Table 3-4: Low-income rates (%) for all persons and selected groups in Manitoba, 2009 45 Table 3-5: Low-income rates (%) for all persons and selected groups in Winnipeg, 2009 45 Table 3-6: Rent increase compared to income growth, Manitoba 46 Table 3-7: Low Paid Workers, 2006 47 Table 3-8: Made in Manitoba Issues – Summary Table 52 Table 3-9: Made in Manitoba Proposal Shortlist 54 Table 3-10: Federal Issues – summary table 59                 1  Project Introduction  With an increasing population and ongoing losses to the rental universe through demolition and conversion in recent years, Manitoba’s rental market has not kept pace with rising demand. As a result, vacancy rates have remained consistently low for the previous decade as rents have steadily risen. Stimulating the production of new rental units is key to Manitoba’s continued growth. Although still relatively affordable compared to other jurisdictions in Canada, Manitoba’s changing rental market requires stakeholders to come together in the spirit of collaboration and shared responsibility. The Rental Housing Supply Roundtable first convened in 2011 to provide advice on the efficacy of strategic directions, plans, policies, programs and services related to the production of rental housing in Manitoba. This project outlines Manitoba’s changing environment (section 1), outlines policy options found in the research literature (section 2), and documents the Roundtable’s work through its final report (section 3). My role in the Roundtable has been substantial through the provision of administrative and research functions. An inventory of my tasks include the following:  Drafting the Roundtable Terms of reference  Attending all Roundtable sessions (6 in total)  Preparing minutes for each Roundtable session  Providing research, analysis, and information on on-going basis at the Roundtable’s request and advising on thematic issues  Preparing in the interim Roundtable report  Organizing Working Groups sessions (3 in total)  Facilitating Working Group session discussion  Presenting at both Working Group and Roundtable sessions  Facilitating proposal shortlist  Preparing Roundtable final report  2  1 MANITOBA MARKET OVERVIEW In both the rental and home ownership markets, Manitoba has experienced a substantial decrease in affordability over the previous decade. This shift is the product of strong economic and population growth combined with a financial environment that encouraged many households to borrow. Increased population added demand to the rental market but new supply did not keep pace. Also, as the cost of home ownership continued to rise, a growing sector of the population began to consider the option too expensive. Rather than transitioning to ownership, they remained in the rental market, further reducing the supply of available units. The following section provides an overview of factors within the Manitoba environment, including economic conditions, population growth, the financial environment, and current housing market that have contributed to this phenomenon. . 1.1 Economic growth: A 2010 article that appeared in Maclean's Magazine described Manitoba as the "shining star of Canada’s recession and subsequent recovery".1 Though "shining star" may have been journalistic hyperbole, Manitoba's post-2008 recovery was indicative of the province's solid performance of the last decade. Much of the province's strong economic performance is attributable to the following key factors:2  A highly diversified economy with a major  presence in manufacturing, transportation, wholesale trade, agriculture, finance and insurance,  Diverse exports; and a broadening foreign export base; 61% sent to the U.S. (compared to Canada: 73%) - producing a lower U.S. market volatility exposure, and a  Stable labour market; high labour force participation rate and low unemployment rate Key indicators of strong economic performance include annual GDP growth. As illustrated in Figure 1-1, between the years 2006 and 2009, Manitoba outperformed both Canada as a whole and the United States. Further, compared to the rest of  Canada, in terms of  average annual growth in real GDP over the years 2006 to 2011, only Saskatchewan recorded a higher annual growth rate (Figure 1-2).3    1  Jason Kirby, " The Manitoba miracle: How an economic laggard became a leader in the recovery," accessed October 2012, http://www2.macleans.ca/2010/12/06/the-manitoba-miracle/  2  Manitoba Finance, "Province of Manitoba: Economic and Fiscal Outlook". November, 2012.  3  Statistics Canada.  "Gross domestic product, expenditure-based, provincial and territorial, annual Table  384-0038". (Ottawa: CANSIM database, 2012).   3  Figure 1-1: Real GDP growth, 2006 - 2011  Figure 1-2: Average annual growth in real GDP, 2006 - 2011  Central to Manitoba's economic performance and ability to weather the post-2008 and 2009 economic downturn is the province's highly diversified economy. Though the province is perhaps best known for its fertile agricultural lands and rich natural resources, no single sector or commodity dominates the industrial base, giving the province a strong resiliency. Manitoba is home to a number of similarly sized industries such as manufacturing, energy, finance, and agriculture, producing a steady if not spectacular rate of growth. According to the Manitoba Department of Finance, 3.6 3 3.7 -0.2 2.2 1.1 -5 -4 -3 -2 -1 0 1 2 3 4 5 2006 2007 2008 2009 2010 2011 United States Canada Manitoba Source: World dataBank, 2012; Manitoba Finance, "Budget Paper A" 2012. 2.5 1.9 1.4 1.4 1.4 1.4 1.3 1.2 1.2 0.9 0.6 SK MB BC NL QC  AB PEI Canada NS NB ON Source: Statistics Canada, "Gross domestic product, expenditure-based", 2012.  4  economic growth in Manitoba is among the most stable in the country, thanks in large part to this broad industrial base.4 As illustrated in Figure 1-3, despite contraction in a few key sectors, the diversity of growth is evident in numerous sectors experiencing 2% or higher average annual growth over the years 2006 to 2011. Figure 1-3: Real GDP average growth by industry, 2006 to 2011  Export balance is another key economic indicator that demonstrates Manitoba’s strong performance. In 2002, Statistics Canada reported that Manitoba was the only province that consistently exported more to other provinces than it did to foreign nations.5 However, by 2004, the province's export share between interprovincial and international had reached par. This improved focus on foreign markets is illustrated by a previous 10 year average of 49.5% interprovincial and 50.5% international export share (Figure 1-4). Furthermore, over the previous decade, Manitoba has more than doubled its share of exports to Asian markets from 9.8% to 22.9%.6  4  Manitoba Finance. Budget Paper A: Economic Review and Outlook. (Winnipeg: Government of Manitoba, 2012).  5 Craig Byrd and Pierre Généreux. The performance of interprovincial and international exports by province and territory since 1992. (Ottawa: Statistics Canada, 2004). 6  Manitoba Finance. "Province of Manitoba: Economic and Fiscal Outlook". November, 2012.  -2.2 -0.5 -0.3 0.5 1.2 1.7 1.8 1.9 1.9 2.0 2.1 2.2 2.3 2.8 2.9 3.3 4.0 4.7 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 Argi, Fishing, Forestry Manufacturing Transportation Utilities Professional services Public admin. Arts and culture Real estate TOTAL Accommodation and food Health and social Mining Other services Finance and insurance Education Retail Construction Wholesale Source: Statistics Canada, "Gross domestic product at basic prices", 2012.  5  Figure 1-4: Interprovincial to international export ratio, 10 year average (%)  Manitoba's unemployment rate has also been consistently low in recent years. Employment growth in 2011 was closely matched by the expansion of the total labour force, and as a result the unemployment rate was unchanged at 5.4% (Figure 1-5). As of 2011, Manitoba had the second-lowest unemployment rate among all provinces for the third consecutive year. At 5.4% the rate was well below the national average of 7.4%, continuing the trend of recent years (Figure 1- 6). The bulk of employment gains in 2010 and 2011 were in construction, manufacturing, health care, finance, insurance and real estate, accommodation and food service industries.  36.7 37.6 44.3 49.5 29.5 36.2 40.5 48 45.4 38.6 63.2 62.3 56 50.5 70.3 63.7 59.4 51.9 54.4 61.4 0% 25% 50% 75% 100% BC AB SK MB ON QC NB NS PEI NL Interprovincial International Source: Manitoba Finance, "Province of Manitoba: Economic and Fiscal Outlook", 2012.  6  Figure 1-5: Unemployment rate (%), 2011  Figure 1-6: Unemployment rate, Manitoba and Canada, 2000 - 2012     12.7 11.3 9.5 8.8 7.8 7.8 7.5 7.4 5.5 5.4 5.0 NL PEI NB NS ON QC BC CAN AB MB SK Source: Statistics Canada , "Labour force survey estimates", 2012. 0 1 2 3 4 5 6 7 8 9 10 %  Manitoba Canada Source: Statistics Canada, "Labour force survey estimates", 2012.  7  In addition to low unemployment rates, Manitoba's stable labour market is also illustrated by high rates of labour force participation. In 2011, the province recorded a participation rate of 69.3%, slightly edging out booming Saskatchewan for the second highest in Canada (Figure 1-7). Further, since 2007, Manitoba's participation has consistently been at or above 69%, high enough to rank in the top three among all provinces.7 Figure 1-7: Labour force participation rate (%), 2011.  1.2 Population growth: According to the Manitoba Bureau of Statistics, the province's 2011 population was estimated at 1,250,574 persons, fifth largest among provinces. Manitoba’s population grew by a record 16,039 persons in 2011, the largest increase in at least 40 years, and the second consecutive year of 1.3% annual population growth, tied for third highest among provinces and above Canada’s 1.0% rate of population increase.8 Manitoba’s population growth is largely driven by international migration (Figure 1-8). Thanks to a strong economy that continues to attract workers and through the highly successful Provincial Nominee Program9, Manitoba annually  7  Statistics Canada, "Labour force survey estimates", 2012.  8  Manitoba Finance. Budget Paper A: Economic Review and Outlook. (Winnipeg: Government of Manitoba, 2012).  9 Canada’s Provincial Nominee Programs are incentive-based strategies to draw immigrants to destinations other than Toronto, Montreal, and Vancouver. Immigrants are selected who will fill specified labour needs, and who are deemed well suited to integrate into life in Manitoba. Rather than applying to Citizenship and Immigration Canada for permanent resident status through the federal family or independent classes, prospective immigrants apply directly to their province of choice. The province reviews applicants based on its own criteria, rather than using the federal points system, and then nominates those who qualify. Despite numerous assessments that have concluded that the Manitoba program is a great success (Carter et al., 2010; Leo and August, 2009), in 2012 69.3 58 60 62 64 66 68 70 72 74 AB MB SK PEI CAN ON QU BC NS NB NL Source: : Statistics Canada , "Labour force survey estimates", 2012.  8  welcomed an average of 14,680 newcomers to the province over the years 2008 to 2012. As a point of reference, between the years 1972 and 2008, the annual average was less than 5,700 people. Further, prior to 2009 and since 1972, Manitoba's population had increased by more than fourteen thousand people in a single year only once, but has done so, or more, for each of the least four years.10 Figure 1-8: Manitoba annual population growth, 1998 - 2012   In the past decade, Manitoba’s population increased by almost 100,000 persons, more than double the previous ten- year increase of 42,000 persons. As of 2012, in the past five years, population increased on average by 14,680 persons annually. During the five year period between 2007 and 2012, Manitoba's population grew 6.1%, an unprecedented rate of growth in the previous 40 years (Figure 1-9). What's more, according to Manitoba Finance, Manitoba’s population is forecast to increase 1.4% and 1.3% in 2012 and 2013, respectively.11  the federal government announced it would take over administration of the program. The impact of these changes remain to be seen.  10  Manitoba Bureau of Statistics. Latest Population Estimates: Manitoba's Population Trends - Past, Present and Future. (Winnipeg: Government of Manitoba. 2012).  11 . Manitoba Finance. Budget Paper A: Economic Review and Outlook. (Winnipeg: Government of Manitoba, 2012). 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total population growth Net international migration Annual natural increase Source: Manitoba Bureau of Statistics, 2012.  9  Figure 1-9: Manitoba population increase, by 5 year period (%)  1.2.1 Financial environment: Enticed by low interest rates (Figure 1-10), in recent years Manitobans have exhibited increased willingness to take on larger debt loads. Though per capita consumer debt includes credit card and personal loan debt as well as mortgages, mortgages tend to constitute the largest element of debt and is therefore a good indicator of swelling mortgage sizes.        3.3% 0.8% 4.0% 1.8% 1.6% 2.8% 6.1% 1971-1976 1977-1982 1983-1988 1989-1994 1995-2000 2001-2006 2007-2012 Source: Statistics Canada, "Estimates of Population", 2012.  10  Figure 1-10: Canadian interest rates, 1980 - 2012  At $22,568, Manitoba's per capita consumer debt remained among the lowest of selected jurisdictions in 2010 (Figure 1- 11).12 Between the years 2004 and 2010, at 73.5% debt was growing faster in Manitoba than any other western province, Ontario, or the national rate (Figure 1-12). However, as the cost of homeownership has risen, an increasing sector of the population remains in the rental market and therefore those units remain occupied, contributing to low vacancy rates.          12  Institute of Chartered Accountants of Manitoba. MB Check-Up: 2011. (Winnipeg: Institute of Chartered Accountants of Manitoba, 2011).  0 5 10 15 20 25 % 5y-fixed-posted 1y-fixed-posted Source: Bank of Canada, 2012.  11  Figure 1-11: Consumer debt per capita, 2004 - 2010  Figure 1-12: Consumer debt per capita, % change, 2004 - 2010  1.3 Manitoba – housing market context: Following strong economic and population growth, and a financial environment that encouraged borrowing, Manitoba’s housing market has undergone a major shift in the previous decade. Rising rents and property values have reduced housing affordability across the province. The following section outlines the current housing environment. 13,011 14,109 15,077 16,630 18,443 20,522 22,568 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 2004 2005 2006 2007 2008 2009 2010 BC AB SK MB ON CAN Source: Institute of Chartered Accountants of Manitoba, 2010 and 2011. 53.2% 69.2% 73.0% 73.5% 23.3% 48.8% BC AB SK MB ON CAN Source: Institute of Chartered Accountants of Manitoba, 2010 and 2011.  12  As stated previously, Manitoba's population growth is driven for the most part by international immigration, and this population places particular pressure on the housing market. International newcomers to Manitoba tend to buy property after a five year period in the province, intensifying the demand for both rental and owner-occupied housing. Further, compared to the rest of the Canadian-born population, newcomers are more likely to be in core housing need and to live in housing that is overcrowded and/or in need of repair. Newcomers are more likely to live in poverty and to experience additional barriers including lack of language skills and lack of cultural knowledge. Lack of recognition of foreign credentials is also a barrier to economic advancement. 1.3.1 Rental Market As illustrated in Figure 1-13, in the 1990s, Manitoba's vacancy rate was consistently at or above the national rate. Further, the rental market was always above three percent and therefore considered balanced. However, as provincial population growth increased, Manitoba found itself consistently below the three percent balanced market threshold and among the lowest vacancy rates in Canada (Figure 1-14). Figure 1-13: Vacancy rates (%), selected jurisdictions, 1992 - 1999  5.8 5.6 5.5 5.2 5.6 5.5 3.9 3.2 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 1992 1993 1994 1995 1996 1997 1998 1999 Canada Ontario Manitoba Saskatchewan Alberta British Columbia Source:  CMHC, Canadian Housing Observer, 2012.  13  Figure 1-14: Vacancy rates (%), selected jurisdictions, 2000 - 2011  Figure 1-15: Manitoba population and vacancy rate, 1992 - 2012  As Manitoba's population has steadily risen in recent years thanks to strong international immigration, the vacancy rate has remained below 2% since 2001 (Figure 1-15). Newly constructed, private market rental unit production has been strong in recent years including 1,010 purpose built rental units in 2011 and 1,004 in 2010 (Figure 1-17), however these gains continue to be offset by permanent removals either through demolition or conversion to condominium. 2.2 1.4 1.4 1.6 1.4 1.9 1.6 1.5 0.9 1.1 0.9 1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Canada Ontario Manitoba Saskatchewan Alberta British Columbia Source: CMHC, Canadian Housing Observer, 2012. 1,000,000 1,050,000 1,100,000 1,150,000 1,200,000 1,250,000 1,300,000 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Manitoba vacancy rate (%) Manitoba population Source: CMHC, Canadian Housing Observer, 2012; CMHC, Rental Market Survey - Manitoba Highlights, Fall 2012, Statistics Canada, "Estimates of Population, 2012.  14  Figure 1-16: Winnipeg population and vacancy rate, 1992 - 2012  Similar to trends for the entire province, the Census Metropolitan Area of Winnipeg has experienced consistently low vacancy rates in the last decade while strong population growth has added to the demand for rental units (Figure 1-16). Winnipeg's rental market has not been balanced, as indicated by a 3% vacancy rate, since 1999. Figure 1-17: Rental starts Manitoba and Winnipeg, 1990 - 2011  620,000 640,000 660,000 680,000 700,000 720,000 740,000 760,000 780,000 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 Winnipeg CMA vacancy rate (%) Winnipeg CMA population Source: CMHC, Canadian Housing Observer, 2012; CMHC, Rental Market Report - Winnipeg CMA, Fall 2012; City of Winnipeg, "Population of Winnipeg, 2012. 0 200 400 600 800 1000 1200 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Manitoba Winnipeg Source: CMHC, Canadian Housing Observer, 2012.  15  Despite strong rental start production, between the years 1998 and 2012, Manitoba's rental universe shrank 3.62% between the years 1998 and 2012 and Winnipeg's universe contracted 8.22 % since 1992 (Table 1-1). According to CMHC forecasts, demand is expected to continue to exceed supply in both Winnipeg and Manitoba, resulting in low vacancy rates for the foreseeable future.13 Table 1-1: Rental universe, Manitoba and Winnipeg Year Manitoba  Winnipeg 1992  Not available (NA) 57,279 1993  NA 56,867 1994  NA 56,461 1995  NA 55,468 1996  NA 54,922 1997  NA 54,305 1998 60,186 53,921 1999 59,059 53,750 2000 58,402 53,460 2001 58,541 53,460 2002 58,520 53,375 2003 59,212 54,095 2004 58,860 53,660 2005 58,226 53,046 2006 58,074 52,895 2007 57,672 52,430 2008 58,266 52,399 2009 59,598 53,154 2010 59,074 52,319 2011 58,325 52,319 2012 58,009 52,569 Source: CMHC, Rental Market Report, Winnipeg CMA, 2012 - 2008; CMHC, unpublished internal data shared upon request.  As of October 2012, the average apartment vacancy rate in Manitoba’s urban centers had increased from 1% in October 2011 to 1.6 %. The rental universe over the same period grew by 348 units. However, Manitoba’s vacancy rate remained the lowest among Canada’s provinces (Table 1-2).    13  CMHC. Rental Market Report - Manitoba Highlights (CMHC: Ottawa, 2012 Fall), 2; CMHC. Rental Market Report – Winnipeg CMA (CMHC: Ottawa, 2012 Fall), 2-5.  16  Table 1-2: Rental universe and vacancy rate by province Province 2011 2012 Rental universe Vacancy rate (%) Rental universe Vacancy rate (%) NB 29,742 4.8 30,079 6.9 PEI 4,978 2.6 5,234 5.0 NS 48,156 2.7 49,070 3.4 QUE 684,391 2.6 696,384 3.0 BC 164,956 2.4 165,308 2.7 ON 627,011 2.2 628,005 2.5 SASK 30,105 1.9 30,501 2.3 NFLD 5,026 1.3 5,057 2.2 AL 113,359 3.4 111,906 2.0 MB 58,059 1.0 58,407 1.6 Source: CMHC, Rental Market Statistics, Fall 2012.  The increasing demand for rental accommodation in Winnipeg is made clear with Figure 1-18 that illustrates how in the previous two decades the CMA has experienced a 14.1% increase in population while the rental universe contracted by more than 8%. Figure 1-18: Winnipeg CMA - total rental universe and population growth, 2002 - 2012  620,000 640,000 660,000 680,000 700,000 720,000 740,000 760,000 780,000 51,000 52,000 53,000 54,000 55,000 56,000 57,000 58,000 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Winnipeg rental universe Winnipeg CMA population Source: City of Winnipeg, "Population of Winnipeg", 2012; CMHC, Rental Market Report, Winnipeg CMA, 2012 - 2008; CMHC, unpublished internal data shared upon request. .  17  As the vacancy rate has trended downward over time, coupled with a decreased rental universe and a growing population, rents in Manitoba and its urban centers, as is to be expected, have increased. Between the years 2001 and 2011, rent for a two bedroom apartment in Manitoba rose 42.6%, third highest among provinces and well above the national rate (Figure 1-19). Figure 1-19: Percentage increase in average rent for two bedroom apartments by province, 2001-2011  The Winnipeg CMA fared even worse over the same period, where rent for a two bedroom apartment rose 44.6%, second highest among Canada's 10 largest CMAs (Figure 1-20). 42.6% 0% 10% 20% 30% 40% 50% 60% 70% 80% SK AB MB NS BC QC PE NL NB CAN ON Source: CMHC, Canadian Housing Observer, 2012.  18  Figure 1-20: Percentage increase in average rent for two-bedroom apartments, 10 largest CMAs, 2001 - 2011   Table 1-3: Rents, major Manitoba urban centers, two bedroom apartments and all apartments, 2011 and 2012   2 Bedroom apartments All apartments   2011 2012 % change 2011 2012 % change Winnipeg 875 911 4.1% 754 783 3.8% Brandon 706 749 6.1% 657 695 5.8% Portage 643 652 1.4% 574 581 1.2% Steinbach 676 708 4.7% 631 664 5.2% Thompson 710 796 12.1% 683 764 11.9% Manitoba 850 887 4.4% 744 775 4.2% Source: CMHC, Rental Market Survey - Manitoba Highlights, 2012.  Average rents in Manitoba increased in 2012 due to strong population growth and no new major additions to the supply of vacant units. Average monthly rent for a two-bedroom apartment in the Winnipeg CMA rose 4.1%, from $875 in October, 2011 to $911 in October 2012.14 Thanks to a growing local economy and international population growth, Brandon, Manitoba experienced an even higher rent increase for both 2 bedroom apartments and all apartments at 6.1% and 5.8% respectively. The highest percentage increases between October, 2011 and October, 2012 took place in Thompson, a northern urban centre that has struggled to attract rental property investment (Table 1-3).  14  CMHC, Rental Market Statistics. (Ottawa: CMHC, Fall 2012). 44.6% 0% 10% 20% 30% 40% 50% 60% 70% Toronto Ottawa Hamilton Kitchener-Cambridge-Waterloo Québec Vancouver Montréal Calgary Winnipeg Edmonton Source: CMHC, Canadian Housing Observer, 2012.  19  Figure 1-21: Average rent 2 bedroom apartments, Manitoba and Winnipeg, 1992 - 2011  Average rents in Manitoba and Winnipeg began to drastically increase on an annual basis around 2002, approximately when the Province began aggressively courting international immigrants (Figure 1-21). Though average rents across the province only rose 9.4% between the years 1992 and 2002, the rate of increase more than quintupled to 55% between 1992 and 2011. Figure 1-22: Average rent 2 bedroom apartment, Manitoba, Winnipeg and Canada, 2004 - 2011  450 500 550 600 650 700 750 800 850 900 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 $  Manitoba Winnipeg CMA Source: CMHC, Canadian Housing Observer, 2012. 650 700 750 800 850 900 2004 2005 2006 2007 2008 2009 2010 2011 %  Manitoba Winnipeg CMA Canada Source: CMHC, Canadian Housing Observer, 2012.  20  Average rents in Winnipeg have climbed so high to $875 that by 2010, for the first time, rents had increased above the national average for a 2 bedroom apartment. Further, as of 2011, the provincial average came close to matching the national average (Figure 1-22). 1.3.2 Homeownership Market Though the focus of this project is rental housing, the homeownership market is also important. An increasingly unaffordable real estate market compels some renters to remain in the rental market, therefore contributing to a low vacancy rate. Further, as detached real estate becomes more expensive, more apartments are converted to condominium to satisfy the growing demand for affordable property. Similar to shifts in the rental market, Manitoba's homeownership market has undergone significant changes in the previous decade. As explained above, buoyed by strong economic and population growth, along with favorable interest rates, the demand for housing has outstripped the existing supply and Manitoba home prices have notably increased. Between the years 2004 to 2011, the average residential price in Manitoba increased by 96.74%, second only to Saskatchewan's rate of price increase (Figure 1-23). Figure 1-23: MLS® Average Residential Price increase by Canadian provinces, 2004 - 2011  Price increases over the years 2004 to 2011 of this magnitude were also found in the Winnipeg CMA, which experienced an increase of 98%. Compared to Canada's largest census metropolitan areas, this rate of price increase was second only to the infamously unaffordable Vancouver real estate market (Figure 1-24). 96.74% 25% 45% 65% 85% 105% 125% SK MB BC NF AB QU ON NS NB PEI Source: CMHC, Canadian Housing Observer, 2012.  21  Figure 1-24: MLS® Average Residential Price increase, ten largest Canadian CMAs, 2004 - 2011 15   Demand for homes across the province remained strong in 2011 and 2012. Provincial housing starts intended for the homeownership market increased by 6.3% between 2010 and 2011 (Figure 1-25).  CMHC predicts that housing starts will remain elevated in 2012 and 2013, as the factors driving demand, such as population and job growth, will remain positive and offer additional support to housing demand in Manitoba. CMHC also indicates that condominium construction will continue to be supported by buyers looking for accommodations that are more affordable than single- detached units.16  15  KCW = Kitchener-Cambridge-Waterloo  16  CMHC, Housing Market Outlook - Prairie Region Highlights. (Ottawa: CMHC, Fourth Quarter 2012).  98% 0% 20% 40% 60% 80% 100% 120% Vancouver Winnipeg Edmonton Calgary Québec Hamilton Montréal  Toronto Ottawa KCW Source: CMHC, Canadian Housing Observer, 2012.  22  Figure 1-25: New homeownership starts Manitoba, freehold and condominium combined, 1991 - 2011  RE/MAX reported that approximately 40% of detached residential 2011 listings in Winnipeg sold at list price or higher and that multiple offers are expected to remain a key factor in the marketplace in 2012 and 2013.17 According to Multiple Listing Service (MLS) data from the Canadian Real Estate Association, in January 2013 the average housing price in Manitoba was $240,115 up from $227,807 in 2012 and $221,933 in January 2011.  Further, average housing prices in Winnipeg increased from $237,832 to $248,720. These increases in the Manitoba and Winnipeg markets represented percentage changes of 5.4 and 4.6 respectively, higher than the national increase of 2% (Table 1- 4). Table 1-4: Average housing price, 2012 and 2013 Jurisdiction January 2012 January 2013 Change (%) Winnipeg 237,832 248,720 4.6 Manitoba 227,807 240,115 5.4 Canada 347,732 354,754 2.0 Source: Canadian Real Estate Association, 2013.  By the end of 2013, CMHC is forecasting home prices in Winnipeg to reach $265,000 in the re-sale market and $415,000 in the new home market. These forecasts represent a 3.9% and 3.8% respective increase from the 2012 forecasts and 143.5% and 91.7% since 2003 (Figure 1-26).  17 RE/MAX, Housing Barometer Report 2000–2010. Accessed October 2012, http://www.remax- western.ca/files/attachments/REMAX_Housing_Market_Barometer_Rpt_FNL_0.pdf 0 500 1000 1500 2000 2500 3000 3500 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: CMHC, Canadian Housing Observer, 2012.  23  Figure 1-26: New home and re-sale markets, Winnipeg CMA, 2003 - 2013f ($)               108,812 265,000 216,458 415,000 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012f 2013f MLS average price (resale) MLS average price (new home) Source:  CMHC., "Housing Market Outlook - Winnipeg CMA , Fall 2012 and Fall 2008.  24  2 Literature review - rental stimulation measures  Many Canadian jurisdictions struggle with the availability of rental housing in the private market. In Canada, new rental housing supply has declined dramatically since the early 1970s.  There were approximately 194,000 housing starts in Canada in 2011, however, only 9.4% of them were intended for the private rental housing market.18 A variety of factors have contributed to the decline in private sector rental construction. A key factor, identified by numerous analysts, is changes to the federal tax climate. Income tax reforms in 1972 such as the introduction of the Capital Gains tax on real estate, and elimination of the ability for individual rental investors to reduce their non-rental taxable income with Capital Cost Allowance deductions from rental property, have resulted in a dramatic drop in new rental starts.  Since that time, other tax changes, such as the introduction of the GST, have had further negative impacts on private rental investments. Landlords and other observers have expressed concerns about rent regulation and have cited these regulations as a contributing factor to the current issues in the rental market.  According to landlords, rent regulation impedes their ability to generate an attractive rate of return on their investment. This is a concern because if the rate of return is low, compared to alternative investments, there may be no incentive to invest in new rental housing and in repairs to the existing stock. It should be noted, however, that proponents of the rental guidelines in Manitoba argue that the landlords may apply for above guideline increases. They point out that the following are exempt from the regulations altogether:  units renting for $1,140 or more per month as of Dec. 31, 2012;  approved rehabilitated rental units; and  new buildings that are: o less than 15 years old, where an occupancy permit was first issued or a unit first occupied after April 9, 2001; or o less than 20 years old, where an occupancy permit was first issued or a unit first occupied after March 7, 2005. As rental housing has fallen out of favour as an investment option relative to other opportunities, the following issues have arisen:  deterioration in the quality of the rental stock - due to reduced expenditures on repair and maintenance because the rent increase guideline is too low;  18  CMHC, Canadian Housing Observer. 2012.  25   reduction in the rental stock - as landlords convert rental property to more profitable uses or allow it to become uninhabitable;  lack of new construction  reduced availability of quality affordable rental o this reduced availability is particularly difficult for first time renters, low income tenants and immigrants because reduced vacancy rates allow landlords to select tenants perceived to present the lowest risk.  The following section outlines a "menu" of measures to remedy this situation and encourage new rental production. As requested by the Roundtable membership, options are presented in two manners: by level of relevant government and categorized by supply and demand side measures. In some instances, actions are applicable to more than one level. 2.1 Measures by level of government - Federal 2.1.1 CMHC’s restrictive mortgage insurance requirements In the 1990s CMHC increased its insurance premiums and introduced underwriting criteria that made it more difficult for developers, both private and non-profit, to get mortgage insurance and, therefore, to access financing for new rental construction. If the federal government were to revise its underwriting criteria for rental development mortgage approval, rental investment would become a more attractive investment.19 20 2.1.2 Income tax legislation Prior to federal tax changes in the early 1970s, rental property owners could defer paying income tax on the profits they made when they sold one of their buildings by investing the money in a new building that cost the same or more than the building that had been sold – this practice was known as “pooling” or “rolling over” the capital cost allowance. Developers could therefore take the money earned on the sale of one apartment building and re-invest in new rental development. Today, rental building owners must pay full income tax on the difference between the sale price of buildings and the depreciated value of the project and capital gains tax if the building sells for more than its original cost. This provides no incentive to encourage rental building owners to invest in new rental developments. Reforming this tax scheme would not represent a loss to government revenue, only a deferral. Further, stimulating further development would, in turn, ultimately expand the tax base. 21 22 23  19  City of Toronto Urban Development Roundtable Rental Working Group, "Unlocking the Opportunity for New Rental Housing: A Call for Action" in Finding Room: Policy Options for a Canadian Rental Housing Strategy, ed. J. David Hulchanski and Michael Shapcott (Toronto: CUCS Press, 2004), 310-313.  20  Clayton Research Associates, The Rental Housing Problem in Ontario and What To Do About it (Scarborough: The Fair Rental Policy Organization, 2000), 22-25.  21  Housing Supply Working Group, Creating a Positive Climate for Rental Housing Development Through Tax and Mortgage Insurance Reforms (Toronto: Housing Supply Working Group, 2002), 5-6, 10-18.   26  Also, the current tax scheme treats “soft costs” such as architecture fees or marketing costs the same way it does “bricks and mortar” costs in developing a building, that is, as depreciable assets rather than deductible expenses. Allowing developers to deduct these “soft costs” from the first year of operation of a new building would encourage new rental development.24 2.1.3 GST legislation Eliminating or lowering sales tax on rental development would decrease the cost associated with rental investment. Currently, the United States does not charge sales tax on rental construction. Industry observers suggest a similar approach in Canada would encourage rental construction. Also, GST is due once the first unit is rented which contributes to a cash flow problem for new buildings and places a further disincentive on rental construction. Allowing developers to pay GST on a pro-rated basis could alleviate this issue. Finally, rents are classified as GST-exempt, which means GST is not charged to renters, but owners cannot claim input credits in constructing or operating buildings. Owners could only claim these credits if rents were re-classified as zero-rated goods.25 26 27 2.1.4 Rental housing tax credit The federal government could stimulate the creation of affordable rental housing by offering tax credits to developers who create low cost housing. The American Low Income Housing Tax Credit Program (LIHTC) could serve as a model. Enacted in 1986, the LIHTC Program provides the private market with an incentive to invest in affordable rental housing through federal housing tax credits awarded to developers of qualified projects. Developers then sell these credits to investors to raise capital (or equity) for their projects. This reduces the amount the developer would otherwise have to borrow. Because the cost of servicing the debt is lower, a tax credit property can offer lower, more affordable rents. Provided the property maintains compliance with the program requirements, investors receive a dollar-for-dollar credit  22  Steve Pomeroy, "Towards a Comprehensive Affordable Housing Strategy for Canada" in  Finding Room: Policy Options for a Canadian Rental Housing Strategy, ed. J. David Hulchanski and Michael Shapcott (Toronto: CUCS Press, 2004), 280-285 . 23  City of Toronto Urban Development Roundtable Rental Working Group, 310-311.  24  Jill Black, "The Financing and Economics of Affordable Housing: Incentives and Disincentives to Private-Sector Participation" (Cities Centre, University of Toronto: Toronto, 2012), 8, 17, 30.  25 Greg Lampert, The Challenge of Encouraging Investment in New Rental Housing in Ontario (Greg Lampert-Economic Consultant, 1995), 32-35.  26  Housing Supply Working Group, 5-7, 13-14.  27 Marion Steele and Peter Tomilson, "Supply-side Measures to Reduce Renters’ Affordability Problems: Identifying the Pros and Cons of Alternative Measures" (paper prepared for  Experts’ Roundtable on policies to increase the supply of affordable rental housing, co-sponsored by the University of Calgary School of Public Policy and the Calgary Homeless Foundation, 2009), iii-iv, 16-18.   27  against their federal tax liability each year for a period of 10 years. The amount of the annual credit is based on the amount invested in the affordable housing.28 29 30 The credit amount for a project is calculated based on the costs of development and the number of qualified low-income units. The credit cannot exceed the amount needed to make the project feasible. To be eligible for consideration under the LIHTC Program, a proposed project must:31  Be a residential rental property.  Commit to one of two possible low-income occupancy threshold requirements. o 20-50 Rule: At least 20 percent of the units must be rent restricted and occupied by households with incomes at or below 50 percent of the Housing and Urban Development HUD-determined area median income o 40-60 Rule: At least 40 percent of the units must be rent restricted and occupied by households with incomes at or below 60 percent of the HUD-determined area median income  Restrict rents, including utility charges, in low-income units.  Operate under the rent and income restrictions for 30 years or longer, pursuant to written agreements with the agency issuing the tax credits. Developers may claim housing tax credits directly, but most sell the tax credits to raise equity capital for their housing project. The developer can sell the tax credits:  Directly to an investor; OR  To a syndicator, who assembles a group of investors and acts as their representative. 2.1.5 Federal land for affordable housing development The City of Toronto and Province of Ontario have taken steps towards making surplus lands available for affordable housing development. The federal government could institute a review of its own surplus lands and determine what  28  Tom Carter. "Stimulating the Production of Affordable Rental Housing" (Discussion paper prepared for Winnipeg Realtors, 2010), 6-7.  29  Marion Steele and Peter Tomilson, iv-v, 18-24.  30  Conference Board of Canada, Building From the Ground Up: Enhancing Affordable Housing in Canada (Ottawa: Conference Board of Canada, 2010), 75-76.  31  US Department of Housing and Urban Development, "HOME and Low Income Housing Tax Credits (LIHTC)", accessed July 2012, http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/affordablehousing/training/web/lihtc   28  land would be appropriate for rental housing development. Further, the federal government could make the lands available, at preferential terms, for rental development.32 2.2 Measures by level of government - Provincial 2.2.1 PST policy In 2002, Manitoba expanded the tax base of the 7% PST beyond construction materials to include mechanical and electrical work. Again in 2004, PST was further expanded to legal, architectural, and engineering fees.33 Providing PST relief on materials and professional services related to the construction of purpose-built rental housing could help foster an improved rental investment environment.34 2.2.2 Encourage municipalities to develop rental housing Municipalities throughout the province vary in terms of the development costs they charge and the by-laws they enact. In some instances these local planning regimes discourage rental housing development. Through policy and incentives, the Province could encourage municipalities to pursue rental housing development. Moreover, some municipalities may already be eager to promote new rental housing in their communities but require provincial support to cover waived or reduced development cost levies.35 2.2.3 Address NIMBYism Too often new rental development is resisted by communities.36 37 The Province should be a leader on the issue and mount a public awareness campaign to explain the numerous benefits and contributions rental housing can make to a community. Furthermore, getting the public on side with a rental housing agenda would support a longer-term effort to convince the federal government to provinces in facilitating a more favourable investment environment. 38 39  32  City of Toronto Urban Development Roundtable Rental Working Group, 314.  33  Greg Lambert, "Briefing Note: PST Changes in Manitoba" accessed May 2012, www.chba.ca/uploads/policy%20archive/2005/2004-06- 22.pdf  34  City of Toronto Urban Development Roundtable Rental Working Group, 315.  35  Ibid., 316.  36  J. Rosie Tighe, "Public Opinion and Affordable Housing: A Review of the Literature" Journal of Planning Literature 25, 1 (2010): 3- 10.  37  Corianne Payton Scally, "The Nuances of NIMBY: Context and Perceptions of Affordable Rental Housing Development" Urban Affairs Review (2012): 2-6. Published online before in print: uar.sagepub.com/content/early/2012/12/20/1078087412469341.full.pdf  38  Affordability and Choice Today, Housing In My Backyard: A Municipal Guide for Responding to NIMBY (ACT: Ottawa, 2009), 7-17.  39  North Carolina Housing Commission, Overcoming the Challenges of NIMBYism (NCHC: Raleigh, no year), 84-94.   29  2.2.4 Maintain existing stock Preserving the existing affordable rental housing stock is an important component of an overall rental housing strategy. It is very much a concern in jurisdictions where the rental universe has shrunk as a result of demolition and redevelopment, through conversion to condominiums or extensive renovation to higher end rental units. There are numerous ways that the Province could encourage the maintenance of the existing stock such as a renovation grant or tax credit, requiring developments to produce replacement units, or rate of change regulations.40 41 42 2.2.5 Provincial land for affordable housing development The City of Toronto and Province of Ontario have taken steps towards making surplus lands available for affordable housing development. The provincial government could institute a review of its own surplus lands and determine what land would be appropriate for rental housing development. Further, the province could make the lands available, at preferential terms, for rental development.43 44 2.3 Measures by level of government - Municipal 2.3.1 Development cost reductions and/or streamlined development process If municipal by-laws treated rental housing as a special category, allowances could be made to waive or reduce development cost charges to encourage production. Further, expedited approval processes for rental development applications could incentivize rent project development. Both Vancouver and Toronto have made efforts in this regard including assigning a planner to each application and being responsible for seeing it through the process. Efforts like this would prevent developers from facing additional expenditures as a result of long approval processes45 46   40  Steve Pomeroy, 277.  41 Deborah Kraus, Jim Woodward, Margaret Eberle and Dianna Hurford, Strategies to Preserve the Existing Rental Housing Stock in Greater Vancouver (Tenants Rights Action Coalition: Vancouver, 2004), 4-12.  42  Ellen Smirl with Clark Brownlee, Brian Grant, Glen Koroluk, Shauna MacKinnon, Gord McIntyre and Don Miedema, Rising Rents, Condo Conversions, and Winnipeg’s Inner City (Canadian Centre for Policy Alternatives-Manitoba, 2012), 26-28.  43  City of Toronto Urban Development Roundtable Rental Working Group, 314.  44  Conference Board of Canada, Building From the Ground Up, 63.  45  Tom Carter, "Stimulating the Production", 10-11.  46  City of Toronto Urban Development Roundtable Rental Working Group, 318.   30  In an effort to stimulate private rental housing production, the City of Vancouver introduced Short Term Incentives for Rental (STIR) in 2009. STIR is the following incentive package:47  Rental property assessment (on rental units only); o applicants may be able to realize reduced property taxes where the rental housing units are secured as rental over time in strata titled projects  Development Cost Levy waiver (on rental units only); o City development cost levies can be waived on units that are designated as rental  Parking requirement reductions (on rental units only); o specifically reduced parking requirements are available for rental units including opportunities for car share to reduce standard parking standards  Discretion on unit size;  Increased density, and; o City will consider increases in density consistent with Planning policy and careful attention to urban design.  Expedited permit processing. Incentives under the STIR program are available subject to the applicant entering into a Housing Agreement to secure the rental units over time. A term of “life of the building or 60 years, whichever is greater” under a Housing Agreement is encouraged. It may also include a prohibition on stratification. The STIR program allows for a minimum of a 20 year term on a Housing Agreement. To date all approved applications have been for “life of the building or 60 years, whichever is greater”. 2.3.2 Review parking requirements Parking requirements reduce housing affordability by adding production cost. Currently the City of Winnipeg requires 1.5 parking spaces per unit of multi-family housing. Research indicates that car ownership on average is lower among renters as incomes tend to be lower with many relying on public transit options. To ensure that parking requirements for rental development are not excessive, parking surveys could be done to estimate rates of automobile ownership among renters.48  47  City of Vancouver, "Short Term Incentives for Rental", accessed April 2012 https://vancouver.ca/files/cov/stir-faq.pdf  48  Todd Litman. Parking Requirement Impacts on Housing Affordability (Victoria Transport Policy Institute: Victoria, 2011), 9-15, 22- 24.   31  2.3.3 Inclusionary zoning Inclusionary zoning refers to zoning regulations or land use ordinances requiring developers to produce a set amount of affordable housing in market-rate residential developments as a condition of development approval – typically between 10% and 25%. The two central goals of inclusionary zoning are to facilitate the creation of mixed-income communities and to produce affordable units through private market development.49 Many municipalities with strong residential development favour inclusionary zoning programs because it can contribute to satisfying strategic housing aims with no direct financial cost to the local government. Inclusionary zoning can be designed in either a mandatory or incentive-based manner. In mandatory programs, it is compulsory that builders and developers provide affordable units as a condition of development approval. In an incentive-based program, developers and builders are offered density bonuses and fast tracked approval processes.50 2.3.4 Density bonusing Density bonusing is a tool to encourage developers of new residential projects to produce affordable units (or other desired amenities, in some instance) in exchange for increased maximum allowable developable floor space. Density bonusing is most viable in strong growth markets, particularly where land for development is scarce.51 In some cases, density bonuses are offered as a cost offset in conjunction with inclusionary zoning programs. Currently in Canada, density bonusing is most widely used in Metro Vancouver, Calgary, Toronto, Ottawa, and Montreal. 2.3.5 Secondary suites A secondary suite is an additional dwelling unit on the same zoning lot. It can be within the existing dwelling or a separate detached dwelling unit. In either case, the secondary suite is subordinate in size, or accessory, to the main dwelling unit. There are numerous benefits to secondary suite development including the expansion of the rental supply, efficient use of existing infrastructure, and providing a “mortgage helper” to homeowners.52 Currently the Province of Manitoba offers a forgivable loan for homeowners developing secondary suites. Also, the City of Winnipeg has recently amended its by-laws facilitating an easier process for both attached and detached secondary suites.  49  David Rusk. “Inclusionary Zoning: A Key Tool in the Search for Workable Affordable Housing Programs” Public Management 88, 3 (2006): 19-20.  50  CMHC. Research Highlights - Municipal Regulatory Initiatives: Providing for Affordable Housing. (Ottawa: CMHC, 1999), 1.  51  Tim Wake. Smart Growth BC Review of Best Practices in Affordable Housing. (Vancouver: Smart Growth BC, 2007), 19-21.  52  Tom Carter, Alexander Gunn, and John Osborne. The Secondary Rental Market: A Literature Review and Case Study. (Winnipeg: The Canada Research Chair in Urban Change and Adaptation, 2009).  32  2.4 Measures by policy option area A key theme in the research literature and echoed by Roundtable discussions was that new rental housing investment at various affordability levels is required and that developing new rental, only at higher end rents, will not address the affordability issue. According to Roundtable discussions, there are two underlying factors that contribute to affordability issues:  Low levels of construction - the demand for rental units, for both private and social/non-profit, has not been met by new production. Within the current environment, developers and investors have demonstrated limited interest in new construction because the risk is seen as too high and rate of return unattractive. Further, there is an erosion of the existing private affordable stock through dereliction, condo conversion, and renovations that increase rents.   Low incomes- incomes have not kept up with the rate rents have risen. While there is some new supply at higher rent levels, weak incomes have intensified affordability problems. Low-incomes also limit access to existing units as, in a tight market, landlords are more likely to prefer tenants with higher-income and stronger references. Responding to problem; two policy option areas:  Supply side measures that reduce the cost of production and therefore create housing units that are available at lower rent. Measures can be directed at public, social/non-profit, or private rental sectors.  Demand side measures that increase the household’s ability to pay. The following table summarizes policy options organized by demand and supply side interventions. The information in these tables draws on the following studies: Tom Carter's Stimulating the Production of Affordable Rental Housing, Marion Steele and Peter Tomlinson's Supply Side Measures to Reduce Renter’s Affordability Problems, the Conference Board of Canada’s Building From the Ground Up, Steve Pomeroy's Toward Comprehensive Affordable Housing Strategy for Canada, and the City of Toronto Urban Development Roundtable Rental Working Group's Unlocking the Opportunity for New Rental Housing: A Call for Action. 33  Table 2-1: Supply side measures Measure Descriptor Advantages Cautions Support for public or social/non-profit production  Public or non-profit owner/operation with mandate to serve households experiencing affordability challenges.  Some form of subsidy – capital grant, favourable mortgage, ongoing subsidy – so that rents remain low.  Operating agreements and any ongoing subsidy maintained through period of mortgage amortization. Ideally project becomes viable on rent revenue after that point.  Rents typically based on RGI formula.  Helps create a permanent stock of affordable units  Addresses both supply and affordability issues.  Construction and the associated per unit cost is high.  Ending operating agreements can create viability problems as tenant population income can be too low to generate sufficient revenues.  Support for private rental unit development (grants, low or interest-free loans)  Rental investment is relatively high-risk and requires a high expected rate of return to attract new development.  Major risk factor is that costs of production are set outside rental sector; labour and materials.  Grants, interest-free loans, or tax credit can improve investment environment.  Adds supply; even at higher end production, new supply can potentially alleviate crowding at lower-priced range (so-called “filtering”)  In some cases, stimulus measures to support private market is less expensive than assisting non-profit development  Expenditure does not create permanent affordable housing.  Stimulus measures can be controversial as they may disrupt the market.  Public asset not created in return for government investment. Tax incentives for rental investors  Rental investment risk high partly because of tax treatment relative to other investments. o Landlords pay GST on supplies and services, but cannot charge GST on collected rent. o Small rental investors are not considered small businesses and therefore not eligible for lower small business taxes. o When a rental project is sold, capital gains taxes apply to the increase in value above the original cost. Prior to 1972, rental investors could defer paying income taxes by “pooling” the capital cost allowance with other buildings. Allowed for the postponing of capital gains tax for owners who were re-investing in rental market.  Adds supply by fostering environment more attractive to investment.   Federal finance officials strongly resist changes to taxes imposed on rental market.  Measures will not specifically target all affordability levels unless incentives are specially tied to certain segments of the market.  34  Measure Descriptor Advantages Cautions Reducing development costs (taxes, fees, DCLs)  Private and non-profit housing providers face high development costs. o  Land, labour, materials, taxes, development fees.  Density bonusing could address land cost issue.  Waiving Development Cost LEvies (DCLs) on rental production.  Reducing cost to development can encourage  investment; common practice for municipalities to waive DCL for desired housing types and locations o STIR in Vancouver, among other things, waives DCLs on rental  Reducing development costs can also help support non-profit rental production.  Unless accompanied by other measures, these cost-reducing options will not make development at lower income levels.  Some form of additional subsidy is likely also required otherwise the new rental units may not remain affordable  Lowered or waived DCLs reduce municipal revenues and must cover cost of development. Encourage lower- cost forms of development (SROs, secondary suites)  Alternative, low-cost housing forms. o Secondary suite – subdivision within owner- occupied existing home o Single room occupancy (SRO) – small, bed-fitting rooms, shared kitchen/washroom/living spaces development  Significant cost advantages.  These approaches could stretch subsidy expenditure because per-unit cost is lower.  Forms often face zoning barriers at municipal level  Potential for NIMBY resistance.  Forms are “new” and therefore there is limited investor interest.         35  Table 2-2: Demand side measures Measure Descriptor Advantages Cautions Rent supplements  An agreement between a government agency and a landlord in which the landlord agrees to provide a rental unit to a low-income tenant.  Typically the tenant is required to pay the RGI portion, and the government agency covers the gap between RGI and market rent.   Rent supplements effectively address affordability challenge recipient is facing.  Agreement is for specific unit, so condition and quality can be verified.  Affordability issue addressed without concentrating low- income households.  A rent supplement does not increase the rental universe.  Landlords less likely to bother with added administrative requirements of a rent supplement tenant in low-vacancy situations.  No retention of affordable units beyond duration of the agreement. Shelter allowance  Direct payments made to the tenant, rather than tied to the unit.  Tenant selects its own accommodation, making its own arrangements with the landlord.  Addresses affordability issue and eases high shelter burdens; in other words helps a low-income tenant operate in competitive housing market.  The benefit formula particulars allow for groups to be targeted.  Shelter allowances do not address low levels of supply.  Subsidy cost will rise as market rent rises.  Critics argue that the benefits of shelter allowances will flow to the landlord and not the tenant as more of the population is able to compete for the existing rental units o Increased competition without new supply could push rents up.  Reform existing shelter benefit  A very high portion of core housing need households and those facing high shelter income ratios are social assistance recipients.  Shelter component of social assistance is not related to actual shelter costs and have not been updated in a number of years.  There is a need to align shelter assistance to true shelter costs.  Addresses affordability issue and eases high shelter burdens.   Shelter allowances do not address low levels of supply.  Market may adjust for increased subsidy, and rents could rise. 36  3 Report of the Rental Housing Supply Roundtable  3.1 Preface Strong population and economic growth has caused Manitoba’s rental housing market to undergo a major shift in the past decade. Rising rents and persistently low vacancy rates necessitate the development of new and expanded supports for new rental housing investment. Manitoba Housing has a legislative mandate to study and bring about change in the housing market for the good of all citizens. According to The Housing and Renewal Corporation Act two of the objectives of Manitoba Housing are: (c) to maintain and improve the condition of existing housing stock; and (d) to stimulate and influence the activities of the housing market to the benefit of Manitobans as a whole. To this end, the Minister of Housing and Community Development invited various housing stakeholders to assemble for the creation of a consultative and collaborative group to provide professional expertise and specialized knowledge relevant to the issue of developing rental housing in Manitoba. Through the representation of a wide spectrum of communities, population groups, and sectors, the roundtable has operated under a principle of collective responsibility as it provided balanced advice and expertise. A list of participants can be found in appendix B.              37  3.2 Introduction  This advisory document is the report from the Rental Housing Supply Roundtable. It contains proposals for the production of new rental housing in Manitoba. These proposals are the result of discussions Roundtable members engaged in beginning in June, 2011. The purpose of this advisory document is to capture the work of the Rental Housing Supply Roundtable which was to identify issues, solutions, and put forward proposals. Further analysis is required to determine implementation specifics arising from these identified issues, solutions, and proposals, This report was prepared with a “Made in Manitoba” lens in mind. It is organized by two sections, one that focuses on matters under the control of the Province and/or Manitoban municipalities, and a second section that outlines longer- term issues and proposals that require the engagement of the federal government. 3.2.1 Rental Housing Supply Roundtable  The Minister of Housing and Community Development invited various housing stakeholders to assemble for the creation of a consultative and collaborative roundtable to provide professional expertise and specialized knowledge relevant to the issue of developing rental housing in Manitoba. Through the representation of a wide spectrum of communities, population groups, and sectors, the roundtable has operated under a principle of collective responsibility as it provided balanced advice and expertise. The Roundtable employed a broad-based, solution focused approach for the development of informed, strategic proposals that identified gaps, barriers, and options for the response to rental housing supply issues in Manitoba. The purpose of the Rental Housing Supply Roundtable was to:  create a forum for the engagement of stakeholders, in a collaborative fashion, towards the development of broad-based solutions to rental housing issues in Manitoba;  provide the Minister of Housing and Community Development with a consultative forum that can provide expert advice on matters related to the production of new rental housing in Manitoba;  provide the Minister or Housing and Community Development with advice on the efficacy of strategic directions, plans, policies, programs, and services related to the production of rental housing in Manitoba;  strengthen and develop partnerships across sectors that will enable the development of new rental housing at a variety of affordability levels.  38  3.2.2 Major themes  Roundtable sessions yielded the following major themes:  New rental housing investment, at various affordability levels, is what is needed.  New rental supply is dependent on the creation of an environment that fosters investor confidence. o Various measures were discussed and considered by Roundtable members; general agreement was reached on some options. o Many of the proposals included in this report are the result of exploring key issues and solutions. In some cases further analysis may be required to determine the specific design of the tool or policy.  A long-term strategy is required, but there also need to be short-term incentives for investment. Such incentives should come from the federal, provincial, and municipal levels of government.  Changes to federal tax treatment of rental housing are a key component in creating an environment for investment. o Prior to approaching federal government, a “Made in Manitoba” strategy that addresses specific issues should be developed.  Addressing lack of rental supply requires a multi-faceted, broad approach. This approach must bring together public, private, and non-profit stakeholders in a partnership package that includes various measures. o A partnership package is a central concept because it conveys the variety of tools and measures essential to addressing rental supply shortages. o Further, the concept recognizes that all sectoral stakeholders have a role and must work in partnership with one another.        39  3.3  Made in Manitoba - Issues and proposed solutions  Roundtable members agreed that measures that address rental housing issues and challenges specific to Manitoba must be developed. It was urged that in addition to engaging the federal government on matters external to the province, a concerted effort by the Province, municipalities, housing providers, social advocates, and private industry must be made to address barriers and provide incentives for the formation of a Made in Manitoba approach. 3.3.1  Issue – Tax treatment of rental housing  Tax treatment of rental housing must be reviewed to better foster an environment that promotes rather than discourages new rental investment. PST Provincial Sales Tax adds cost on services and materials needed to develop new purpose-built rental housing.  In 2002, Manitoba expanded the tax base of the 7% PST beyond construction materials to include mechanical and electrical work. Again in 2004, PST was further expanded to legal, architectural, and engineering fees. Because PST is the singular domain of the provincial government, waiving or reducing the tax would be a clear signal to developers that the Province is committed to a Made in Manitoba approach to new rental housing supply. A1: The Rental Housing Supply Roundtable proposes a PST reduction on materials and services used in the construction of new purpose-built rental housing. Property or income tax Municipalities and the Province should stimulate the development of rental housing by attracting investment through property tax relief. “Tax holidays” for a stated period of time can be established to reduce construction costs during development and reduce operating costs during the first few years of operation. A2: The Rental Housing Supply Roundtable proposes a property or income tax program for the first 5 to 10 years of the project’s life. In some municipalities, property tax on multiple unit buildings is higher than rates levied on owner-occupied dwellings. Reducing the property tax on rental properties would reduce operating costs and could pass lower rents on to tenants. A3: The Rental Housing Supply Roundtable proposes the Province work with municipalities to equalize property tax rates on rental housing.   40  Education tax In Manitoba, education is financed in part as a portion of property taxes rather than general revenues. A coalition led by the Manitoba Real Estate Association, WinnipegREALTORS, the Winnipeg Chamber of Commerce, and the Manitoba Chambers of Commerce are calling for the removal of school taxes from the property tax bill. With respect to rental properties, eliminating the education tax would reduce operating costs and could pass lower rents on to tenants. A4: The Rental Housing Supply Roundtable proposes that the Province remove the education tax from property tax bills of rental housing properties, both primary and secondary markets. Tax increment financing Tax increment financing (TIF) is a tool that allows for the promotion of specific types of development by earmarking anticipated tax revenue increases for the purpose of creating a revitalization fund. In simple terms, it enables a local authority to trade anticipated future tax income for a present benefit. Tax revenues generated incrementally after a property’s assessment has increased due to any improvement go into a fund for grants for developers creating or refurbishing residential housing. Currently TIF is available for certain developments in downtown Winnipeg. A5: The Rental Housing Supply Roundtable proposes that the Province, in collaboration with the City of Winnipeg, expand TIF for purpose built rental housing to areas beyond downtown Winnipeg. Further, the Rental Housing Supply Roundtable proposes that TIF be expanded to other municipalities beyond Winnipeg.  3.3.2 Issue - Costs of construction that influence rental rate and rate of return on investment  New rental supply is dependent on the creation of an environment that fosters investor confidence. The demand for both market and subsidized rental units, has not been met by new production, and within the current environment investors have demonstrated only limited interest in new construction. Simply the risk is too high and rate of return unattractive. Further, where there has been new rental construction, the costs are such that it creates rents unaffordable to many Manitobans. The problem of a lack of construction is compounded by the erosion of the existing private affordable stock through dereliction, condo conversion, and renovation. In particular, some members argued that Manitoba’s rent guideline system needs to be a transparent and predictable process.53 Further, Manitoba’s rent guideline process was described as problematic because it lacks voluntary vacate54,  53  Ontario and British Columbia were cited as examples of transparent, predictable guideline systems.  54  When a tenant chooses to leave a unit, the landlord is then exempt from the rent control guidelines. Once a new tenant moves into the unit, the rent regulations are re-applied.   41  no tenant-landlord negotiation, and burdens the industry with too much paperwork at the Residential Tenancies Branch (RTB) request. Views on the Provincial rent guidelines remained contentious throughout the Roundtable process. Property managers and developers maintain that the guidelines discourage new investment in rental housing by having a negative impact on the rate of return. Other members made the case that the regulations are necessary to protect tenants from drastic rent increases, especially in tight rental markets. Further, some members pointed out that numerous exemptions are already in place. The lack of consensus on this important matter resulted in no rent guideline-specific proposals being included in the Roundtable’s report. Capital Grant For the purpose of estimating the required per unit subsidy for the creation of new reasonable market rent units, the City of Winnipeg modeled a pro-forma revenue and costs exercise, that assumed low rise (e.g. no elevator requirement) wood-frame construction apartment buildings.55 Unit sizes were assumed to be 650 sq ft for a 1 bedroom unit, and 800 sq ft for a 2 bedroom unit. The benchmark for rent affordability is often seen as median rent. For 2011, the unadjusted median rent for a one- bedroom unit in Winnipeg was $655/month, and $860/month for a 2-bedroom unit.56 Table 3-1: Estimated Required Subsidy for Construction of New Affordable Rental Units, Winnipeg  Working estimate, 1 BR unit (650 sq ft) Working estimate, 2 BR (800 sq ft) Per unit cost of construction $110,000 ($170/sq ft) $125,000 ($155/sq ft) Capital cost supported by annual operating income $50,000 $85,000 Net deficit/required subsidy per unit $60,000 $40,000 Source: City of Winnipeg, Winnipeg Housing Steering Committee, 2011  This exercise roughly estimates a $60,000 required subsidy per one-bedroom unit and $40,000 per two-bedroom unit for the creation of a new affordable unit. Manitoba Housing, in consultation with the private sector, has been conducting similar analyses and estimates a required $45,000 to $55,000 subsidy for the creation of affordable rental units.  55  Cost realities vary across Manitoba and indeed within Winnipeg. Model is helpful for establishing a rough guide only.  56  Source for adjusted, cold rents is CMHC’s Rental Market Survey.  42  In an effort to improve the new rental investment environment, the Rental Housing Supply Roundtable is proposing the following: B1: The Rental Housing Supply Roundtable proposes that the Province provide capital grants on a per unit basis to stimulate the development of reasonable market rents. The amount would have to be enough to contribute to, in conjunction with other measures, addressing the gap between reasonable market rents and revenue required for an attractive rate of return. In some parts of the province, this grant at minimum may have to be 15K per door. This estimated grant level would incent new production at current new rental market rates, but not necessarily an affordable unit. Because of cost variances from centre to centre, rather than proposing a specific grant amount, the Rental Housing Supply Roundtable is proposing that developers apply for grants through a request for proposal (RFP) competition. Developers would be required to document how much they needed to produce rental units, and available grants would vary depending on the details of the project and location. Development Cost Charges Development cost charges are levied on new development to offset the cost of new infrastructure serving needs. Developers have to pay the levies, which contributes to the cost of construction and factors into the rents that are ultimately charged. Development cost charges vary from municipality to municipality and cross-jurisdictional comparison is difficult because different municipalities categorize their fees differently. B2: The Rental Housing Supply Roundtable proposes the Province work with municipalities towards reducing or waiving development costs on purpose-built, rental housing development. B3: The Rental Housing Supply Roundtable proposes that the Province encourage municipalities who do levy development charges to do so on a per project, rather than per door basis. Tax Credit Program A major barrier preventing the production of new rental housing is an investment environment that does not allow the industry to gain a strong rate of return. The provincial government could stimulate the creation of affordable rental housing by offering tax credits to developers who create affordable housing. Tax credits could be issued directly to develop rental units or could be handled through a credit trading system to attract other investment. A housing tax credit program, the Low-Income Housing Tax Credit (LIHTC), was introduced in the United States in the 1980s. LIHTC is strongly supported by housing advocates and the building industry and is considered by analysts to be an effective tool for creating new affordable rental supply. The program provides tax credits worth a high percentage of  43  construction costs under the condition that landlords accept only tenants with incomes no higher than 60 percent of area medians and set rents at an affordable level (30 percent of tenant gross household income). These conditions tend to last for the first 30 years of the project’s life. It should be noted that because of differences between the US and Canadian tax systems, the LIHTC is not a model that can be directly imported to the Manitoba context. However, there are “in principle” lessons that can be learned from the LIHTC. B4: The Rental Housing Supply Roundtable proposes that the Province create an affordable, rental housing tax credit program that has specific applicability to the Canadian and Manitoban tax environments. 3.3.3  Issue – Affordability  The affordability issue is a matter of two distinct but overlapping matters: a range of supply options at a variety of affordability levels and income. Housing supply variety An accepted standard of affordability used by provincial jurisdictions across Canada, CMHC, the US Department of Housing and Urban Development, and elsewhere in the world is a 30% shelter-cost-to-income ratio (STIR). STIR is a measure that refers to the proportion of total before-tax household income spent on shelter. The cost of adequate shelter should not exceed 30% of gross household income. Housing which costs less than this is considered affordable. Defining affordability in terms of a percentage of income allows for the relativity of situations in which income becomes insufficient to pay shelter cost as well as the myriad of other household expenses. Based on household incomes, as a point of reference, 27.6% of Winnipeg households cannot afford the average 2BR rent ($837) (Table 3-2).57      57  In reality the percentage of households who cannot afford a 2 BR apartment is likely higher as it is expected that a portion of the $30,000 to 39,999 range cannot afford the $837, but the number is unknown.   44  Table 3-2: Winnipeg income ranges and affordable rents based on 30% threshold. Household income in 2005 of private households ($) Total households in income range (%) Accumulative total (%) Approximate affordable rent Less than 10, 000 5.5  >250 10,000 ‐ 19,999 10.8 16.3 250 – 500 20,000 - 29,999 11.3 27.6 500 – 750 30,000 - 39,999 12.1 39.7 750 - 1000 40,000 - 49,999 10.5 50.2 1000 - 1250 50,000 - 59,999 9.1 59.3 1250 – 1500 60,000 - 69,000 8.1 67.4 1500 - 1750 70,000 and over 32.7 100 <1750 Source: Statistics Canada, 2006.  Table 3-3: Average rent by type, Winnipeg 58 . Housing type Rent ($) Bachelor 488 1BR 649 2BR 837 Townhouse (all sizes) 873 3BR 1056 Source: CMHC. Rental Market Report, Winnipeg CMA (Fall, 2011).  Individuals and households with lower incomes have less access to private market units and therefore are limited to non-profit providers offering social and/or affordable housing options. It should also be noted that the Department of Housing and Community Development estimates that 60% of households that fall under Low Income Cut-Offs (LICO) in Manitoba are working poor who maintain employment as their main source of income. The following two tables illustrate low-income rates for all persons as well as specific groups who would likely have difficulty competing in the private rental market.       58  Excludes utilities.   45  Table 3-4: Low-income rates (%) for all persons and selected groups in Manitoba, 2009 Group 2009 LICO 59  MBM 60  All Persons 8.9 9.7 Children 9.1 11.6 Seniors 6.2 3.6 Lone-parents 21.9 24.2 Unattached non-elderly 27.3 27.4 Off-reserve Aboriginal 13.5 17.2 Activity Limited 12.1 12.7 Source: Brian Murphy et al., (2012).  Table 3-5: Low-income rates (%) for all persons and selected groups in Winnipeg, 2009 Group 2009 LICO MBM All Persons 10.6 8.3 Children 11.9 8.3 Seniors 9.7 3.6 Lone-parents 26.5 20.8 Unattached non-elderly NA NA Off-reserve Aboriginal 13.6 13.8 Activity limited 13.6 11.3 Source: Brian Murphy et al., (2012).  Providing a diverse range of housing options will better allow people, of various needs, to access suitable housing. Fostering housing choices at various affordability levels and of a variety of housing sectors, will move us forward to meeting the housing needs of our most vulnerable citizens as well as households looking to compete in the non-profit, co-op and private rental markets. C1: The Rental Housing Supply Roundtable proposes that the Province pursue supply measures that housing sectors across the housing continuum, including non-profit, co-op, affordable private, and private market rental units have equal access to.  59  Low Income Cut-Offs – a measure intended to convey the income level at which a family may be in straitened circumstances because it has to spend a greater portion of its income on the basics (food, clothing and shelter) than does the average family of similar size. LICO is a relative approach to measuring low-income.  60  Market Basket Measure - a measure of low income based on the cost of a specified basket of goods and services. MBM is an absolute approach to measuring low-income.  46  C2: The Rental Housing Supply Roundtable proposes that private rental development subsidy programs be designed to include a conditional affordability eligibility requirement. The size and depth of subsidy should be established based on a sliding scale of affordability. In addition to providing incentives that support housing supply across the continuum, protecting the existing affordable and social housing stock requires a continued public investment. To this end, support for the existing social, non-profit and co-op sectors is needed. C3: The Rental Housing Supply Roundtable proposes that the Province continue investing in the publicly- supported stock and improve the quality of the affordable, private rental stock. With a need for a range of housing options in mind, affordable housing choice can be further supported through secondary suites. The Province already has a secondary suite grant program and the City of Winnipeg is in the process of reviewing its relevant bylaws. C4: The Rental Housing Supply Roundtable proposes that the Province and municipalities work together to further support the development of secondary suites. Incomes Incomes have not kept up with the rate in which rents have risen in Manitoba. While there is some new rental supply at higher rent levels, lower incomes are unable to access them. The following table illustrates the manner in which income growth has not kept pace with the rise of rents. Table 3-6: Rent increase compared to income growth, Manitoba  2000 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 % change (2000- 2009) Median Household Income After-Tax, Homeowner and Renter Households ($000) 42.2 43.6 43.2 43.8 44.3 45.4 45.5 47.2 49.7 49.3 NA NA 16.8% Median Household Income After-Tax, Renter Households ($000) 25.6 26.7 28.8 27.5 26.8 27.3 27.6 28.1 29.4 28.4 NA NA 10.9% AVG Rent for Two- Bedroom Apartments ($) 581 596 612 633 650 669 692 721 748 788 815 850 35.6% Source: CMHC. Canadian Housing Observer, 2012.   47  The shelter allowance component of Employment and Income Assistance (EIA) has fallen far below the cost of living and households of limited financial means are having great difficulty competing in the private rental market.  EIA shelter allowances must be reviewed and re-indexed to better reflect conditions and costs of living. The Right to Housing Coalition, in a February 2012 letter sent to Manitoba Housing and Community Development, recommended that the Province raise EIA Housing Allowances and Manitoba Shelter Benefits to allow recipients to afford 75% of median market rental levels. The Coalition argues that such an increase would restore the benefit to its 1992 level. Further, low income working households not collecting EIA could benefit from a portable shelter allowance that pays the difference between 30% of the household’s monthly income and market rent of the unit. A portable shelter allowance program pays a subsidy directly to working low income Manitobans to improve their living situation and allow them to better compete in the existing private rental market. Portable shelter allowances differ from rent supplements which are attached to a specific unit. The table below illustrates how for a large number of Manitobans, low-income is a product of labour market participation, not exclusion from it. In 2006, 19.4% of all employed workers in Manitoba were earning less than $10 an hour, 3.7% higher than the national rate. When youth are excluded the rate falls to 10.6%, however climbs again when women workers are isolated. Table 3-7: Low Paid Workers, 2006   Canada Manitoba Difference All paid less than $10/hr 2,194,100 97,100 % of all employed workers 15.70% 19.40% 3.70% Adults (age 25+) 1,013,600 42,900 % of employed adults 8.80% 10.60% 1.80% Women (15+) 1,355,100 55,600 % of employed women 19.70% 22.50% 2.80% Source: CUPE, 2007. C5: The Rental Housing Supply Roundtable proposes that the Province review existing EIA shelter rates and increase the benefits to better reflect the cost of housing; and further, that this review be made a regularly scheduled process. C6: The Rental Housing Supply Roundtable proposes that the Province provide an RGI portable shelter allowance for low-income working households.     48  3.3.4 Issue – Capacity  The capacity issue combines two distinct matters: labour shortages as well as community planning capacity. Labour Market Support Rental Housing Supply Roundtable members have stated that industry conditions are such that even in a pro- development investment environment, new construction would likely be impeded by capacity issues. In other words, in Manitoba we do not have the industry capacity to meet the demand for new supply because skilled labour shortages limit the rate of new development. According to the Construction Sector Council’s labour market forecast for Manitoba, Construction Looking Forward (2011), construction employment is expected to rise more than 20% between 2011 and 2014 and 11% from 2011 to 2019. The report says an estimated 6,000 new workforce entrants will join the construction industry, but that retirements will also reduce it by about 6,400. The exit of 6,400 workers attributed to retirements and mortality raises the total labour force requirement to 10,700. With only 6,000 new entrants expected to join the industry across the 2011-2019 scenario, a balance of 4,600 workers will need to be recruited from outside the local construction market to meet labour requirements. Manitoba Construction Sector Council, a partnership of the Construction Association of Rural Manitoba, the Manitoba Building and Construction Trades Council, the Manitoba Heavy Construction Association, the Manitoba Home Builders' Association and the Winnipeg Construction Association, have already initiated a series of training programs to help address the labour shortage. D1: The Rental Housing Supply Roundtable proposes that the Province partner with the Manitoba Construction Sector Council to help support labour market training programs; and further, that labour market training programs with a specific aim towards training Aboriginal Peoples, new Canadians, women, and youth be developed. Community Capacity In addition to labour shortages, capacity is also a concern with regard to what some Manitoba communities are able to achieve. Many communities across Manitoba want to increase their supply of rental housing, but are unaware of options/tools available to them. There is a general need to build expertise in many municipalities. Many that are being affected by immigration and experiencing population growth have not had to plan, develop land, attract housing investment or improve infrastructure for many years. Some of these municipalities need funding support for land and infrastructure development but they also need help building a base of expertise that will facilitate planning and housing  49  development.  The Province already provides support to planning districts, but knowledge of this support should be intensified to make communities aware of tools available to increase rental housing supply. Supports for municipalities could include:  Help with market analysis;  Development of housing needs assessments;  Support for development of economic development strategies;  Help with developing community planning and development strategies;  Assistance with preparing long term growth strategies;  Assistance with land development;  Help with preparing packages of information that developers need if they are interested in working in the community. D2: The Rental Housing Supply Roundtable proposes that the Province develop a set of resources, supports, and capacity building tools to help communities in the production of new rental housing. The Association of Manitoba Municipalities, Housing and Community Development, Manitoba Local Government and Manitoba Agriculture, Food and Rural Initiatives could partner for this purpose. 3.3.5 Issue - Regulatory obstacles  In some instance, counter-productive or unnecessary regulations pose a barrier to new rental supply development. Regulations ought to support rather than impede affordable rental development and at times they add cost and reduce capacity. Permitting Process Expedited approval processes for rental development applications could provide incentives for rental project development. Both Vancouver and Toronto have made efforts in this regard including assigning a planner to each application. The planner is responsible for seeing the application through the process. Efforts like this would prevent developers from facing additional expenditures as a result of long approval processes. E1: The Rental Housing Supply Roundtable proposes that the Province work with municipalities to help them establish an expedited permit approval process for rental development applications.    50  Regulatory Environment Other regulatory obstacles include:  Apprentice-journeyman labour training ratios that reduce the number of skilled trades people entering the already too small workforce.   Excessive health and safety regulations that can delay projects and add costs.   Building codes that are handed down from federal and provincial levels that are not tailored to best suit local conditions, and therefore hinder the development of creative forms of housing.   Parking requirements that reduce housing affordability by adding development cost. Currently the City of Winnipeg requires 1.5 parking spaces per unit of multi-family housing.  Regulatory obstacles such as these require significant study and consultation before appropriate decisions can be made, therefore the Rental Housing Supply Roundtable has concluded that further consideration is required before specifics can be offered. E2: The Rental Housing Supply Roundtable proposes that the Province engage in dialogue and partner with relevant provincial departments, municipal governments, labour organizations, or industry associations to create a regulatory environment more hospitable to new rental development.  3.3.6  Issue – Awareness  Many Manitobans are well-housed and are not aware of the social and economic problems associated with low rental housing production. Attempts to engage the general population on this issue are often instigated by niche organizations and the media tends to pigeonhole their efforts. A lack of awareness of the economic and social benefits of new, rental housing development can lead to NIMBYism, a tendency for residents to oppose new rental development. The Province should be a leader on the issue and mount a public awareness campaign to explain the numerous benefits and contributions rental housing can make to a community. Furthermore, getting the public on side with a rental housing agenda would support a longer-term effort to convince the federal government and provinces to facilitate a better investment environment. F1: The Rental Housing Supply Roundtable proposes that a broad-based coalition, made up of advocates and industry associations, be formed to raise rental housing issues to the broader Manitoba community. Such a body could evolve as an offshoot of the Roundtable and be continuous and on-going.  51  F2: The Rental Housing Supply Roundtable proposes that a broad-based education campaign be formed to address and educate the public on NIMBYism. F3: The Rental Housing Supply Roundtable proposes that the broad-based coalition give talks and presentations at various forums across the province.                         52  3.4 Made in Manitoba summary table  Table 3-8: Made in Manitoba Issues – Summary Table Issue Proposal # Rental Housing Supply Roundtable proposal Relevant level of government (P=provincial, M=municipal) 3.3.1 - Tax treatment of rental housing A1 The Rental Housing Supply Roundtable proposes a PST reduction on materials and services used in the construction of new purpose-built rental housing. P A2 The Rental Housing Supply Roundtable proposes a property or income tax relief program for the first 5 to 10 years of the project’s life. P, M A3 The Rental Housing Supply Roundtable proposes the Province work with municipalities equalizing property tax rates on rental housing. P, M A4 The Rental Housing Supply Roundtable proposes that the Province remove the education tax from property tax bills of rental housing properties, both primary and secondary markets. P A5 The Rental Housing Supply Roundtable proposes that the Province, in collaboration with the City of Winnipeg, expand TIF for purpose built rental housing to areas beyond downtown Winnipeg. Further, the Rental Housing Supply Roundtable proposes that TIF be expanded to other municipalities beyond Winnipeg. P. M 3.3.2 - Costs of construction that influence rental rate and rate of return on investment B1 The Rental Housing Supply Roundtable proposes that the Province provide capital grants on a per unit basis to stimulate the development of reasonable market rents. The amount would have to be enough to contribute to, in conjunction with other measures, addressing the gap between reasonable market rents and revenue required for an attractive rate of return. In some parts of the province, this grant at minimum may have to be 15K per door.  This estimated grant level would incent new production at current new rental market rates, but not necessarily an affordable unit.  Because of cost variances from centre to centre, rather than proposing a specific grant amount, it the Rental Housing Supply Roundtable is proposing that developers apply for grants through a request for proposal (RFP) competition. Developers would be required to document how much they needed to produce affordable rental units, and available grants would vary depending on the details of the project and location. P B2 The Rental Housing Supply Roundtable proposes the Province work with municipalities towards reducing or waiving development costs on purpose- built, rental housing development. P. M B3 The Rental Housing Supply Roundtable proposes that the Province encourage municipalities who do levy development charges to do so on a per project, rather than per door basis. P. M B4 The Rental Housing Supply Roundtable proposes that the Province create an affordable, rental housing tax credit program that has specific applicability to the Canadian and Manitoban tax environments. P  C1 The Rental Housing Supply Roundtable proposes that the Province pursue supply measures that housing sectors across the housing continuum, including non-profit, co-op, affordable private, and private market rental units have equal access to. P C2 The Rental Housing Supply Roundtable proposes that private rental development subsidy programs be designed to include a conditional affordability eligibility requirement. The size and depth of subsidy should be established based on a sliding scale of affordability. P  53  Issue Proposal # Rental Housing Supply Roundtable proposal Relevant level of government (P=provincial, M=municipal) C3 The Rental Housing Supply Roundtable proposes that the Province continue investing in the publicly-supported stock and improve the quality of the affordable, private rental stock. P C4 The Rental Housing Supply Roundtable proposes that the Province and municipalities work together to further support the development of secondary suites. P,M C5 The Rental Housing Supply Roundtable proposes that the Province review existing EIA shelter rates and increase the benefits to better reflect the cost of housing; and further, that this review be made a regularly scheduled process. P C6 The Rental Housing Supply Roundtable proposes that the Province provide an RGI portable shelter allowance for low-income working households. P 3.3.4 - Capacity D1 The Rental Housing Supply Roundtable proposes that the Province partner with the Manitoba Construction Sector Council to help support labour market training programs; and further, that labour market training programs with a specific aim towards training Aboriginal Peoples, new Canadians, women, and youth be developed. P D2 The Rental Housing Supply Roundtable proposes that the Province develop a set of resources, supports, and capacity building tools to help communities in the production of new rental housing. The Association of Manitoba Municipalities, Housing and Community Development, Manitoba Local Government, and Manitoba Agriculture, Food and Rural Initiatives could partner for this purpose. P, M 3.3.5 - Regulatory obstacles E1 The Rental Housing Supply Roundtable proposes that the Province work with municipalities to help them establish an expedited permit approval process for rental development applications. P, M E2 The Rental Housing Supply Roundtable proposes that the Province engage in dialogue and partner with relevant provincial departments, municipal departments, labour organizations, or industry associations to create a regulatory environment more hospitable to new rental development. P, M 3.3.6 - Awareness F1 The Rental Housing Supply Roundtable proposes that a broad-based coalition, made up of advocates and industry associations, be formed to raise rental housing issues to the broader Manitoba community. Such a body could evolve as an offshoot of the Roundtable and be continuous and on-going.  F2 The Rental Housing Supply Roundtable proposes that a broad-based education campaign be formed to address and educate the public on NIMBYism. F3 The Rental Housing Supply Roundtable proposes that the broad-based coalition give talks and presentations at various forums across the province.          54  3.5 Made in Manitoba proposal shortlist  Roundtable members recognized the need to identify a shortlist drawn from the larger Made in Manitoba proposal list. A voting process yielded the following shortlist: Table 3-9: Made in Manitoba Proposal Shortlist A2 The Rental Housing Supply Roundtable proposes a property or income tax relief program for the first 5 to 10 years of the project’s life. B1 The Rental Housing Supply Roundtable proposes that the Province provide capital grants on a per unit basis to stimulate the development of reasonable market rents. C1 The Rental Housing Supply Roundtable proposes that the Province pursue supply measures that housing sectors across the housing continuum, including non-profit, co-op, affordable private, and private market rental units have equal access to. C5 The Rental Housing Supply Roundtable proposes that the Province review existing EIA shelter rates and increase the benefits to better reflect the cost of housing; and further, that this review be made a regularly scheduled process. C6 The Rental Housing Supply Roundtable proposes that the Province provide an RGI portable shelter allowance for low-income working households. D1 The Rental Housing Supply Roundtable proposes that the Province partner with the Manitoba Construction Sector Council to help support labour market training programs; and further, that labour market training programs with a specific aim towards training Aboriginal Peoples, new Canadians, women, and youth be developed.   No single proposal had unanimous support, however B1, C1, and C5 all received votes from much of the Roundtable.  Furthermore, C261 and C362 received significant support and nearly made the shortlist.        61  The Rental Housing Supply Roundtable proposes that private rental development subsidy programs be designed to include a conditional affordability eligibility requirement. The size and depth of subsidy should be established based on a sliding scale of affordability.  62  The Rental Housing Supply Roundtable proposes that the Province continue investing in the publicly-supported stock and improve the quality of the affordable, private rental stock.  55  3.6 Federal matters - Issues and proposed solutions  There is general agreement among Roundtable members that federal action on rental housing development incentives is crucial. There was some debate with regards to the efficacy of lobbying the federal government as Ottawa has been resistant to rental housing incentive programs. This situation is reflected in this report being divided by a Made in Manitoba approach as well as long-term matters. The following outlines issues and proposed solutions relevant to federal jurisdiction and federal engagement. 3.6.1 Capital cost allowance  Prior to federal tax changes in the early 1970s, rental property owners could defer paying income tax on the profits they made when they sold one of their buildings by investing the money in a new building that cost the same or more than the building that had been sold – this practice was known as “pooling” or “rolling over” the capital cost allowance. Developers could therefore take the money earned on the sale of one apartment building and re-invest in new rental development. Today, rental building owners must pay full income tax on the difference between the sale price of buildings and the depreciated value of the project and capital gains tax if the building sells for more than its original cost. There is no incentive to encourage rental building owners to invest in new rental developments. Reforming this tax scheme would not represent a loss to government revenue, only a deferral. Further, stimulating further development would, in turn, ultimately expand the tax base. The Rental Housing Supply Roundtable proposes that the federal government increase the capital cost allowance deduction on rental properties. 3.6.2 GST  Eliminating or lowering sales tax on rental development would decrease the cost associated with rental investment. Currently, the United States does not charge sales tax on rental construction. This tax environment encourages new rental supply. Also, rents are classified as GST-exempt, which means GST is not charged to renters, but owners cannot claim input credits in constructing or operating buildings. Owners could only claim these credits if rents were re- classified as zero-rated goods. The Rental Housing Supply Roundtable proposes that landlords be allowed to claim refundable GST credits for GST they pay on purchase of material and services in operating the building and the GST they pay if they purchase a building.  56  GST is due once the first unit of a new building is rented, which contributes to a cash flow problem for new buildings and places a further disincentive on rental construction. The Rental Housing Supply Roundtable proposes that landlords be allowed to pay GST on a pro-rated basis. 3.6.3 Mortgage insurance requirements  In the 1990s CMHC increased its insurance premiums and introduced underwriting criteria that made it more difficult for developers, both private and non-profit, to get mortgage insurance; and, therefore, more difficult to access financing for new rental construction. The mortgage insurance premiums effectively doubled and the restrictive underwriting criteria had the effect of mandating that investors put up a much larger equity investment than might otherwise have been necessary.63 The Rental Housing Supply Roundtable proposes that CMHC revise its underwriting criteria for new rental development mortgage approval. 3.6.4 Federal land for affordable housing development  Cheap land reduces development cost and could substantially reduce housing costs to the consumer. The federal government could institute a review of its own surplus lands and determine what land would be appropriate for rental housing development. Further, the federal government could make the lands available, at preferential terms, for rental development. The Rental Housing Supply Roundtable proposes that the federal government make land for rental development available at reduced costs. 3.6.5 Affordability  In addition to providing incentives that support new housing supply, protecting the existing affordable and social housing stock requires a continued federal investment. To this end, support for the existing social, non-profit and co-op sectors is needed.  63  In 1998, CMHC announced a change in their underwriting criteria for existing rental projects which recognized market cap rates and market mortgage rates, rather than the previously (much higher) prescribed rates. There has been no announcement of similar changes with respect to underwriting for new rental projects.   57  The Rental Housing Supply Roundtable proposes that the federal government renew operating agreements with social, non-profit, and co-op housing providers to maintain the viability of the publicly-supported affordable housing stock. The Rental Housing Supply Roundtable proposes that the federal government provide predictable, long-term funding for new social housing supply and renovation programs. 3.6.6 Industry capacity  As earlier outlined in 2.4., industry conditions are such that even in a pro-development investment environment, new construction would likely be impeded by capacity issues. In addition to support from the Province and municipalities, labour training and economic development partnerships could be strengthened by federal participation. Federal labour training initiatives already exist that may need re-focusing. The Rental Housing Supply Roundtable proposes that in partnership with the Province of Manitoba and the Manitoba Construction Sector Council, the federal government help support labour market training programs that aid industry capacity. 3.6.7 Low-income housing tax credit program  As outlined above (2.2), a major barrier preventing the production of new rental housing is an investment environment that does not allow the industry to gain a strong rate of return. Earlier in this document it was proposed that the provincial government could stimulate the creation of affordable rental housing by offering tax credits to developers who create low cost housing. Such a tax credit program could be enhanced with federal participation. A housing tax credit program, the Low-Income Housing Tax Credit (LIHTC), was introduced in the United States in the 1980s. LIHTC is strongly supported by housing advocates and the building industry and is considered by analysts to be an effective tool for creating new affordable rental supply. The program provides tax credits worth a high percentage of construction costs under the condition that landlords accept only tenants with incomes no higher than 60 percent of area medians and set rents at an affordable level (30 percent of tenant gross household income). These conditions tend to last for the first 30 years of the project’s life The Rental Housing Supply Roundtable proposes that the Province of Manitoba, in conjunction with the federal government, create an affordable, rental housing tax credit program.    58  3.6.8 Engagement  It was proposed that a Made in Manitoba strategy ought to be developed while simultaneously making efforts to engage the federal government. It is thought that work put into a Made in Manitoba approach will bolster our position with respect to federal engagement With that said, Roundtable members supported building a broad-based alliance of public, private, and non-profit stakeholders across Canada to help better make our case to the federal government. The Rental Housing Supply Roundtable proposes that a private-public coalition, specific to federal rental housing incentives, should be formed with counterparts in other provinces and territories. The coalition ought to be multi- stakeholder and should be supported by private industry and social policy organizations. The Rental Housing Supply Roundtable proposes that the Province make efforts to bring the issue of rental housing supply on to the agenda at various forums such F/P/T meetings and the Western Premiers Conference. The Rental Housing Supply Roundtable proposes that Roundtable members consider joining and become active in the Canadian Rental Housing Coalition.                59  3.7  Federal matters summary table  Table 3-10: Federal Issues – summary table Issue Proposal Capital cost allowance The Rental Housing Supply Roundtable proposes that the federal government increase the capital cost allowance deduction on rental properties. GST The Rental Housing Supply Roundtable proposes that landlords be allowed to claim refundable GST credits for GST they pay on purchase of material and services in operating the building and the GST they pay if they purchase a building. The Rental Housing Supply Roundtable proposes that landlords be allowed to pay GST on a pro-rated basis. Mortgage insurance requirements The Rental Housing Supply Roundtable proposes that CMHC revise its underwriting criteria for new rental development mortgage approval. Federal land for affordable housing development The Rental Housing Supply Roundtable proposes that the federal government make land for rental development available at reduced costs. Affordability The Rental Housing Supply Roundtable proposes that the federal government renew operating agreements with social, non-profit, and co-op housing providers to maintain the viability of the publicly-supported affordable housing stock. The Rental Housing Supply Roundtable proposes that the federal government provide predictable, long-term funding for new social housing supply and renovation programs. Industry capacity The Rental Housing Supply Roundtable proposes that in partnership with the Province of Manitoba and the Manitoba Construction Sector Council, the federal government help support labour market training programs that aid industry capacity. Low-income housing tax credit program The Rental Housing Supply Roundtable proposes that the Province of Manitoba, in conjunction with the federal government, create an affordable, rental housing tax credit program. Engagement The Rental Housing Supply Roundtable proposes that a private-public coalition, specific to federal rental housing incentives, should be formed with counterparts in other provinces and territories. The coalition ought to be multi-stakeholder and should be supported by private industry and social organizations. The Rental Housing Supply Roundtable proposes that the Province make efforts to bring the issue of rental housing supply on to the agenda at various forums such F/P/T meetings and Western Premiers Conference. The Rental Housing Supply Roundtable proposes that Roundtable members consider joining and become active in the Canadian Rental Housing Coalition.        60  Works Cited  Affordability and Choice Today. (2009). 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Accessed November 2012, http://databank.worldbank.org/ddp/home.do?Step=12&id=4&CNO=2                         64  APPENDIX A: Rental Housing Supply Roundtable - Terms Of Reference  Housing and Community Development Rental Housing Supply Roundtable Terms of Reference  1. BACKGROUND:  Challenges associated with rental housing production in Manitoba require a fresh, solution-centred approach. With falling vacancy rates and a decreasing rental universe in most of Manitoba’s largest urban centres, the time is now to bring together housing stakeholders to work together towards the creation of new rental supply.  The Minister of Housing and Community Development is calling on various housing stakeholders to assemble for the creation of a consultative and collaborative roundtable working group to provide professional expertise and specialized knowledge relevant to the issue of developing rental housing in Manitoba. Through the representation of a wide spectrum of communities, population groups, and sectors, the roundtable can effectively act under a principle of collective responsibility as it provides balanced advice and expertise.  The roundtable will engage in a broad-based, solutions focused approach for the development of an informed strategy. Furthermore, this solutions focused approach will help to identify gaps, barriers, and options for the response to rental housing supply issues in Manitoba.  The Rental Housing Supply Roundtable will be co-chaired by the Minister of Housing and Community Development and Mel Boisvert of the Professional Property Managers Association.  2. PURPOSE:  2.1. To create a forum for the engagement of stakeholders, in a collaborative fashion, towards the development of broad-based solutions to rental housing issues in Manitoba.  2.2. To provide the Minister of Housing and Community Development with a consultative forum that can provide expert advice on matters related to the production of new rental housing in Manitoba.  2.3. To provide the Minister or Housing and Community Development with advice on the efficacy of strategic directions, plans, policies, programs, and services related to the production of rental housing in Manitoba.  2.4. To strengthen and develop partnerships that will enable the development of new rental housing at a variety of affordability levels.  3.  MEMBERSHIP:  3.1. In collaboration with the suggestions provided by the co-chair, roundtable members will be selected by the Minister of Housing and Community Development  3.2. The roundtable will consist of approximately 15 members.  3.3. Membership consists of individuals who have professional expertise relevant to the mandate of the roundtable in various areas such as but not limited to: finance, real estate, property management, housing, social policy, economic policy, co-operatives, and community and social development.   65  3.4. The membership of the panel is to be reflective of private, non-profit and cooperative housing sectors.  3.5. Panel members will serve at the pleasure of the Minister of Housing and Community Development and may withdraw their services at any time providing appropriate notice.  3.6. Members will need to declare conflict of interest regarding specific matters discussed at meetings.  3.7. Membership will consist of individuals recognized as leaders in their respective fields with capacity to influence and disseminate information and comment on rental housing issues.  4. FUNCTIONING:  4.1. Frequency of meetings and attendance of members at meetings will be determined by the Minister. Tentatively, members may be asked to meet once per 6-8 weeks.  4.2. Members should be available whenever possible, but are not expected to attend all meetings in whatever form they may take.  4.3. The agenda for meetings will be set by the Minister in collaboration with the co-chair.  4.4. Public statements in relation to the subject matter or discussion of the panel will be made only by the Minister, or by members at the direction of the Minister.  4.5. Members are expected to provide balanced view and constructive advice on the matters being discussed.  4.6. The views of the member will be their own and not necessarily be representative or any organization with which that are associated.  4.7. Reimbursement of expenses will be available to panel members if necessary.  5. TASKS/DELIVERABLES:  The Rental Housing Supply Roundtable will:  4.1 Identify barriers that hinder the development of rental housing.  4.2 Establish priorities and consider potential solutions.  4.3 Determine possibilities for what a shared strategy might look like including what the primary sector responsibilities might be and identify actionable items.  6. ROUNDTABLE SUPPORT  6.1 Strategic initiatives will support the Rental Housing Supply Roundtable by providing research, documentation, administration, and preparation the final report.      66  Appendix B: Rental Housing Supply Roundtable membership  Member name Organization Co-chair Mel Boisvert Winnipeg Realtors Association Dorota Blumczynska Immigrant and Refugee Community Organization of Manitoba Clark Brownlee Right to Housing Coalition Tom Carter Carter and Associates Avrom Charach Professional Property Managers Association Chuck Davidson Winnipeg Chamber of Commerce Mayor Eileen Clarke (Gladstone) Association of Manitoba Municipalities Karl Falk DSI Tandem Co-Op Resources Dianne Himbeault (no longer active) Canada Mortgage and Housing Corporation Ross McGowan CentreVenture Gordon McIntyre Winnipeg Rental Network Shauna McKinnon Canadian Centre for Policy Alternatives-Manitoba Mike Moore Manitoba Home Builders' Association Lawrence Poirier Kinew Housing Bob Shaer Ash Management Group Karla Skoutajan Co‐operative Housing Federation of Canada Rubin Spletzer Crystal Developers Peter Squire Winnipeg Realtors Association Don White Colliers International     67  APPENDIX C: Proposal Shortlist Voting  A1 A2 A3 A4 A5 B1 B2 B3 B4 C1 C2 C3 C4 C5 C6 D1 D2 E1 E2 F1 F2 F3 Votes recorded pre-meeting  X  X X  X X   X  X X X  X   X  X X X  X   X  X  X  X  X   Votes recorded at meeting  X  X  X  X X   X  X   X X  X  X  X   X  X  X  X   X X  X X X   X  X  X  X X     X  X  X  X X        Votes recorded after meeting  X  X X X  X   X  X  X  X X   X  X  X  X  X   TOTAL 3 5 1 2 1 11 1 0 2 8 4 4 0 10 5 4 2 0 1 2 0 0 TOP 5                  68  APPENDIX D: Jurisdictional scan  The following summarizes an information request the Department of Housing and Community Development conducted in November, 2011. Housing authorities from across Canada were asked to outline measures they have in place to attract private sector housing investments. Jurisdiction One time Per Unit Capital Grants Loans and / or Loan Guarantees Tax Incentives Other Incentives Other Information Including Website Links AB One-time capital grants to help increase the supply of housing for lower-income and homeless Albertans. N/A N/A N/A http://www.housing.alberta.ca/pi_ind ex.cfm  NWT N/A Corporate Loan Guarantee: -Short-term corporate loan guarantees to encourage developers to build new speculative affordable housing or renovate existing properties & to assist landlords to build or upgrade residential units or the residential portion of a building. N/A Housing for Staff: -Designed to address staff housing needs in rural & remote non market communities and provide for improved recruitment & retention of staff Incentives are: -A forgivable loan up to $25,000/unit -Corporate loan guarantee -Provision of construction management services.  Corporate Loan Guarantee Information: An ongoing policy and guarantees have the following maximum limits: -$2 million per developer and for no longer than a five year period. -New construction - $400,000 per unit or the NWTHC's Maximum Construction Cost (MCC) for that community, whichever is highest. -Renovation projects - $150,000 per unit. SK Affordable Home Ownership Program: -Match the municipal contribution with a grant of up to the lesser of the education portion of property tax for 5 years or $5,000. Rental Construction Incentive: -Provincial grant of up to Headstart on a Home Program: -Secured loans to finance the construction cost of entry level housing units -Loans at annual 4% fixed rate. N/A Summit Action Fund: -Total of $6 million is available to encourage housing stakeholders to propose creative housing solutions not covered by existing housing programs. Website Links: Affordable Homeownership Program: http://www.socialservices.gov.sk.ca/A HOP-app-instructions.pdf  Rental Construction Incentive: http://www.socialservices.gov.sk.ca/R CI-factsheet.pdf   69  Jurisdiction One time Per Unit Capital Grants Loans and / or Loan Guarantees Tax Incentives Other Incentives Other Information Including Website Links $5,000 to match municipal grants for each new rental unit constructed.    Rental Development Program: -One-time conditional, forgivable loan used for development of project. -Up to 70% of the final eligible capital costs of project.  Summit Action Fund: http://www.socialservices.gov.sk.ca/s ummitactionfund  Headstart on a Home: http://headstartonahome.ca/  Rental Development Program: http://www.socialservices.gov.sk.ca/R ental-Development-RFP.pdf  NS Affordable Housing New Rental: -Capital contribution up to $25,000/unit -Private developer contribute 20% of develop. costs to get rents at or below market for 15 year period. -60% has been with private sector & 40% non-profits.  N/A N/A N/A -The rental housing sector is very stable and there are no operating grants, waiving of fees, tax credits or development bonuses. -Municipalities in Nova Scotia do not provide incentives for affordable housing but play a role in facilitating development in the area of land use and the planning approvals. ON N/A Infrastructure Ontario: -Can make loans to municipalities for affordable housing development. -Can loan funds to non-profits & co-ops if other government funding is present. Ontario municipalities: -Tax Increment Funding (TIF) Ontario municipalities: -Can enact capital-facility by-laws to waive or reduce development charges, property taxes, building permits and other fees. -Can apply the lower single dwelling rate of property tax to affordable housing projects. Website Links:  http://www1.infrastructureontario.ca /en/loan/index.asp  http://www1.infrastructureontario.ca /en/loan/faq.asp  http://www1.infrastructureontario.ca /en/loan/rates/index.asp    70  Jurisdiction One time Per Unit Capital Grants Loans and / or Loan Guarantees Tax Incentives Other Incentives Other Information Including Website Links   MB Rental  & Cooperative Housing Program: -Manitoba Housing has issued a Request for Proposals (RFP) for seniors housing and an Expression of Interest for family housing. -Program is for community partners who want to develop new affordable rental and co- operative housing for seniors & families with low-to- moderate incomes. -A one-time project capital contribution is available through a fully forgivable loan that does not have to be repaid if select terms and conditions are adhered to over the span of a 15 year financial assistance agreement. -Funding will be limited to the lesser of the following:  -35% of total eligible project capital costs or  -$60,000 per residential unit (or $70,000 per residential unit in northern communities). Secondary Suites Program: -Provides financial assistance to eligible homeowners to construct a secondary suite, in the form of a forgivable loan for 50% of the total construction / renovation costs to a maximum of $35,000 per suite. Downtown Winnipeg Residential Development Grant Program (DWRDG) Tax Increment Financing Act:  - Provides up front grants to developers based on incremental municipal property taxes to assist with the construction of additions to, or the new construction, or conversion, or redevelop. of existing vacant multiple residential buildings located in Downtown Winnipeg. -The max. Grant ranges from $25K and $40K per unit for those with assessed values between $150K and $400K. N/A RFP for Affordable Family Housing: http://www.gov.mb.ca/housing/famil y_housing_eoi.html?print  RFP for Affordable Seniors Housing: http://www.gov.mb.ca/housing/sr_ho using_rfp.html?print  Secondary Suites: http://www.gov.mb.ca/housing/ssp.ht ml?print  BC  Community Partnership Initiatives: -Provides mortgage financing for housing Family with Children Property Tax Deferral: -Available to all BC Housing Endowment Fund: -$250 million fund was established to encourage Community Partnership Initiatives & Housing Endowment Fund: http://www.bchousing.org/Initiatives/ Financing  71  Jurisdiction One time Per Unit Capital Grants Loans and / or Loan Guarantees Tax Incentives Other Incentives Other Information Including Website Links solutions, without the need for operating subsidies. families with children under the age of 18. -Families are given the right to defer their property taxes similar to program available to seniors and persons facing hardship.   Partial Rebate of HST paid: -New housing purchased as primary residence up to a max of $26,250 for new homes up to $525,000. -Will not pay any more in provincial tax due to harmonization new ideas and support innovative housing solutions for British Columbians most in need. -More than 40 innovative housing proposals received more than $25 million to develop nearly 400 affordable housing units and other unique projects.  Strata Property Amendment Act: -Provides greater certainty and flexibility for purchasers, owners and tenants with respect to strata rentals. -Ensures new strata developments can help better meet the market demand for rental units.  Rental Assistance Program: -Since 2006 approx. 9,310 low income working families receive direct monthly cash assistance to help pay rent with an average payment of $260 per month per family. -Families may choose their housing from the  Other noted information: -The Province works with representatives of the building and development industries, as well as with local governments to assess barriers to housing affordability, explore ways to streamline building processes, and consider possible incentives to promote more affordable housing. The current focus of collaboration includes policy development to: -Encourage innovative alternatives to traditional single family dwellings like secondary suites, smaller homes, and infill housing. -Increase housing options and density near transit. -Encourage regional and municipal housing strategies and targets. -Fast-tracking affordable housing. -Uniform building code.  -The provincial government mandates exemptions from local development cost charges and levies for small-unit housing projects and allows waivers for for-profit affordable rental housing.   72  Jurisdiction One time Per Unit Capital Grants Loans and / or Loan Guarantees Tax Incentives Other Incentives Other Information Including Website Links private market including condos and townhouses.  Shelter Aid for Elderly Renters (SAFER): -Has been improved and expanded with over 15,880 seniors’ households benefitting from direct monthly cash assistance to help pay the rent.  

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